The Short-Squeeze Is Coming For Workhorse Group
If the GameStop (NYSE:GME) debacle wasn’t enough to convince short-sellers of Workhorse Group (NASDAQ:WKHS) to be wary the run-up in the cannabis market should have been. High short interest is the target of a new breed of American investor, the crowd-sourced social-media warriors, and the EV market will be no exception. Most of the EV manufacturers carry some amount of short-interest, it is a high volatility market after-all, but some, like Workhorse Group, carry an above-average amount and are ripe for a good squeeze.
S-3 Partners made note of that very fact just a week or two ago. According to them, the shorts are already running scared with short-covering in shares of Workhorse (among some others) rising steadily in the face of growing losses. The good news, for investors anyway, is that short-interest remains at an extreme 23% level and could fuel a massive spike in share-prices in the very near future. Unlike the Gamestop story, however, a short-squeeze Workhorse Group is more likely the precursor to a longer-term rally and not the pump-and-dump Gamestop became.
It Is A Golden Age For EV And Workhorse Group
The analysts have nothing but good things to say aboutthe EV market and we concur. The secular shift to EV is gaining momentum around the globe and it is supported by government policy. China and the U.S. are quickly catching up to the EU and trends in both nations are accelerating. Not only are environmental policies fueling the move so are stimulus efforts. Tax rebates and incentives for manufacturers are helping to expand capacity within the industry as well as drive demand for vehicles. The Biden plan to electrify the national fleet is worth many millions of vehicles alone and that is just the tip of the iceberg.
Wedbush thinks EV sales could reach 5% of the total market by the end of this year which is an aggressive target that assumes 66% YOY growth. The thing to remember is that while auto sales fell 20% in 2020 because of the virus sales of EV surged nearly 40% and gained a large chunk of market share. Bloomberg echoed the sentiment with its forecast for EV investment over the next decade. According to their estimates, business investment into EV development and production will grow at a 20% CAGR for the next five years at least and will overtake investment in renewables in the same time frame.
The takeaway is that the time is ripe for EV manufacturers to ramp production and generate profits. Unlike most of the competition, Workhorse Group is already in production of its flagship line and already ramping that production. There will surely be hurdles to overcome but the orders are already rolling in and there is the UPS contract to think about. UPS is still deciding what to do about its $6.5 to $7 billion EV plan but Workhorse Group is expected to be a part of them.
Workhorse Will Blow Away Q4 Consensus
Workhorse Group is slated to report the Q4 period in early March. The detail we noticed is that, while revenue jumped in the 3Q period because of rising deliveries and growing orders the consensus for revenue hasn’t budged. Not one but two national brands (Pritchard Companies and Pride Group Enterprises) confirmed large orders that guarantee steady if not growing business for the next several years. This sets the company up to not only beat but to absolutely smash the consensus figures.
On a technical basis, shares of Workhorse Group are in an uptrend and on the verge of signaling another entry point. In the near-term, price action appears to be heading lower but a major support target is not far below. If price action bounces from the short-term moving average and confirms the trend upward movement is expected to follow. Whether or not it sparks a massive short-squeeze remains to be seen.
