After a spectacular rally in 2020, many electric vehicle (EV) stocks have taken a breather this year. Several EV stocks are now trading significantly below their record highs providing investors an opportunity to buy the dip.
The shift towards clean energy solutions is inevitable and should gain significant momentum in the upcoming decade making EV stocks interesting investments right now. Demand for commercial EVs is also set to explode as enterprises look to lower their carbon footprints. Further, EV manufacturers will benefit from economies of scale in the future which will reduce production prices and fuel enterprise demand.
These factors could make companies such as Workhorse Group (WKHS) and Electric Last Mile Solutions (ELMS) good additions to your EV portfolio. But which between the two stocks is a better long-term buy?
Workhorse Group is a company that designs, manufactures, and sells electric vehicles and aircrafts in the U.S. It also develops cloud-based and real-time telematics performance monitoring systems to enable fleet operators to optimize energy. The company offers medium-duty electric trucks under the Workhorse brand while its HorseFly Unmanned Aerial System is an all-electric drone system.
The stock went public back in August 2014 and has since returned an impressive 1,150% in this period. However, it’s also trading 70% below record highs.
In Q1 of 2021, Workhorse reported revenue of $521,000 compared to $84,300 in the prior-year period. The company delivered just six C-Series electric vans in Q1 and its revenue was significantly lower than consensus estimates of $2.3 million.
Its adjusted operating loss widened to $16.5 million in Q1, compared to $9.1 million in the prior-year period. However, the operating loss was lower compared to Wall Street estimates of almost $20 million.
Its net loss soared to $120 million on the back of an accounting charge of $136.6 million. This non-cash charge is related to its 10% stake in Lordstown Motors (RIDE), a company that has been grappling with integrity and credibility issues. At the end of 2020, Workhorse’s stake in Lordstown was valued at $330 million and has since fallen to $152 million which suggests investors should brace for additional write-downs in Q2 as well.
Analysts expect Workhorse sales to rise to $75 million in 2021 and to $246 million in 2022.
Electric Last Mile Solutions
Electric Last Mile Solutions is valued at a market cap of $1.23 billion and the company designs and manufactures last-mile delivery EVs. The stock IPO’d in late 2020 and is currently down 31% from all-time highs.
The company just announced it has partnered with China-based Wuling Motors. According to the terms of this agreement, “ELMS will have long-term access to EV component systems and parts from Wuling Motors’ commercial EV cargo van platform for the manufacture of the ELMS all-electric Urban Delivery vehicle.”
According to ELMS’ investor presentation, it expects to deliver 4,000 vehicles this year and generate $122 million in sales. It expects the top-line to grow at an annual rate of 123% through 2025 to over $3 billion while vehicle deliveries are expected to rise to 83,000 that year.
This will allow ELMS to improve its bottom line from an operating loss of $101 million in 2021 to an operating profit of $791 million in 2025.
At this time, I believe Electric Last Mile Solutions is a better buy. Electric Last Mile Solutions is growing at a faster pace and is also trading at a lower valuation compared to Workhorse Group. Further, Workhorse’s exposure to Lordstown Motors will make it volatile in the near term especially if the latter files for bankruptcy.
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WKHS shares were trading at $12.26 per share on Tuesday morning, down $0.53 (-4.14%). Year-to-date, WKHS has declined -38.02%, versus a 17.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...
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