Workhorse Group (NASDAQ: WKHS) and Lordstown Motors (NASDAQ: RIDE) shares are moving in different directions post-Q3-earnings release but both stocks are set up to rally into year-end. The key takeaway from both reports is that production has begun, deliveries are being made (or on the schedule) and both should ramp in 2023. While one report was disappointing and the other coupled with other good news those drivers are near-term in nature, the long-term drivers of the EV market are production and revenue so now that those are in the picture share prices should effect a full reversal and begin moving higher. The only question is when?
Lordstown Motors Gets Juiced By Foxconn Deal
Lordstown Motors' success has as much to do with Foxconn as anything else because without Foxconn’s assistance the company probably would have gone bankrupt. Now, a year or so after the initial deal was announced and production of the Endurance has begun Foxconn is increasing its stake in the company. The new deal was announced a day ahead of the Q3 results and is worth $170 to Lordstown Motors and will bring Foxconn’s stake up to 18.3% of the company. The new investment will grant Foxconn 2 board seats as well and terminates the original deal. The bad news is that Lordstown Motors will have to find an OEM partner to help scale Endurance production because Foxconn and Lordstown, effectively the new EV branch of Foxconn, are already focusing on a new EV program based on Foxconn’s platforms.
The Endurance production is begun but slowly given the fact 12 trucks have been built (as of the Q3 release) and only 500 or so will be finished in the 1st batch. The first deliveries are expected in Q4 pending regulatory approvals but this will also result in some revenue and incoming cash flow to offset spending. The company is still well-capitalized and will be even better-capitalized following the completion of the new deal but losses continue as well. Net cash and equivalents are down 12% YOY but this burn may begin to slow with the onset of deliveries.
Workhorse Falls On Mixed Results
Workhorse Group delivered weaker-than-expected results but take that news with a grain of salt. The results were weaker than expected but revenue is up 367% YOY on the production and delivery of the newly revamped vehicles. The company’s efforts are slowed by component availability but ramping up and expected to meet the original 2022 targets. The best parts about this report are that deliveries have begun, production is ramping, and there is ample room in the outlook for the company to smash the consensus estimates. The company narrowed its target range for production to 100 to 200 vehicles but is still expecting $15 to $25 million in annual revenue compared to the $18 million expected by the analysts.
Here is a highlight from the Q3 report that should help support the share price going into the end of the year … “Completed the transformation and expansion of Workhorse’s Union City plant into a world-class manufacturing complex, doubling available floorspace. The plant has started initial production of Class 4 vehicles, is finalizing process layout plans for W56 production scheduled to begin in Q3 2023 and is actively adding hourly staff, as it continues to ramp up production on the W4 CC and prepares for the start of production of the W750 in Q1 2023.”
The Technical Outlook: Workhorse Trades At Bottom
Workhorse Group is trading at a bottom and may begin to move higher at any time. The Q3 results did not give a catalyst so “any time” may not be until the next earnings reporting cycle. In that event, price action may move sideways at this level until then but other news could get the stock moving. A confirmed reversal driven by news and trading volume would be a technical trigger for entry that may attract more money as well.