Workhorse Surges as B. Riley Sees Faster Time to Market

Workhorse can still deliver, B. Riley says, even after it lost the contest for a U.S. Postal Service contract.
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Workhorse Group  (WKHS) - Get Report can still deliver even after losing the contest for a U.S. Postal Service contract, according to a B. Riley Financial analyst, who initiated coverage of the electric-vehicle maker with a buy rating.

Shares of the Loveland, Ohio, company at last check were surging 12.27% at $13.08.

Analyst Christopher Souther, who has a $20 price target on the stock, said in a research note that "Workhorse has the potential to gain early footing with key customers as it ramps up production and sales this year."

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"The company will be beating to market most of the electric competition focused on the delivery space by quarters or years with its C-Series ramp expected this year," the analyst said. 

"[And] we believe the larger-size cargo offers differentiation in the space relative to the smaller-volume vans coming from the large auto original equipment manufacturers and upstarts."

Souther said that nearly all large fleets are pursuing multiple OEM purchases, "so opportunity remains ripe for the company to gain early share."

Workhorse Group was set back in February after the Postal Service awarded a contract to build new delivery trucks to rival Oshkosh  (OSK) - Get Report. Workhorse shares tumbled at that time and Souther said the USPS loss "created a buying opportunity."

Workhorse has asked the USPS for more information on its choice of Oshkosh. The analyst noted that the company has hired legal counsel "and will consider all available options as far as pursuing the bid."

"It is unclear whether calls for funding from USPS to accelerate electrification plans or from Democrats to halt the contract and investigate the process will lead to Workhorse being awarded a piece of the program or speed up the plans for retrofitted vehicles," he said, "but we believe that WKHS shares are likely to trade in a volatile manner as the process evolves."

The company's shares also took a hit last month after Workhorse missed Wall Street's fourth-quarter-revenue expectations.