Powered by Sentiment: Is Workhorse Set to Become Social Media’s Next Meme Stock Favourite?

Workhorse Group has become one of many stocks to follow in the footsteps of GameStop and AMC and undergo a sizable rally as a meme stock. With shares climbing some 1,200% at their peak in 2021 compared to their 2020 opening price, there appears to be some indication that the best is yet to come for the popular electric vehicle firm. 

Following its seismic rally in late January and early February this year, Workhorse had shown signs of a revival in June, climbing around 91% from its mid-May lows before shrinking to a price of $7.41 that hasn’t been seen since the summer of 2020. 

As we can see from its price chart, Workhorse is now trading at similar prices to its 2016 stock values. This decline in share value has largely been attributed to various setbacks that the company’s experienced throughout the year, but this has enabled WKHS to dip to what’s likely to be an attractive price for meme investors to pick the stock up. 

Workhorse’s price history shows that the EV firm is no stranger to significant rallies in recent years, so could WKHS be ready for another pump in the near future? 

Representing a Different Proposition to GME & AMC

Although WKHS has experienced a range of meme-based rallies in recent months, it’s a stock that’s fundamentally different from the likes of GME, AMC and BlackBerry, all of which have seen significant price increases occur across 2021. 

(Image: Financial Times)

As the chart above shows, these stocks belonging to companies that have generally struggled to adapt to digital acceleration have all significantly outperformed the S&P 500 in 2021, but Workhorse represents a different proposition entirely. 

As Maxim Manturov of Freedom Finance Europe, who identified WKHS as a key potential meme stock for the future acknowledges, Workhorse Group “is a technology company based in the United States that designs, manufactures, builds, and markets battery electric vehicles and aircraft. In addition, the company is working on real-time, cloud-based telematics performance monitoring systems to help vehicle fleet operators optimize energy and route efficiency.” 

This is a business that’s a far cry from the aforementioned firms that were likely to be a key fixture in the formative years of the ongoing new wave of US retail investors growing up, but Maxim believes that the lack of nostalgia connecting investors to WKHS is insignificant. 

“In fact, nostalgia or sentimentality plays a minor role in the steady rise of AMC, GameStop, and other meme stocks and is more a result of high levels of liquidity in the financial system and pandemic factors than a cause,” Maxim said. “Individual investors must, without a doubt, control their emotional purchasing and selling impulses, which can be triggered by market ups and downs, FOMO, and other factors.”

So, could these high liquidity levels find their way back into supporting the growth of Workhorse Group stocks? At the current price of WKHS, it may represent something of a discounted buying opportunity for speculative investors. 

Pricing Bad News into Stock Value

Despite already proving to be an attractive prospect for meme investors across recent months, it’s important to note that Workhorse has experienced more than its fair share of setbacks recently which certainly have to be considered when valuing the stock. 

In mid-September, Workhorse Group were forced to suspend the deliveries of the company’s flagship C-1000 electric vans, claiming that the vehicles required more testing and modifications before meeting the mandatory standards required of them. 

The EV delivery vehicle manufacturer confirmed that it had only delivered six of its C-series vans when it came to reporting Q1 results for 2021. While revenues rose to some $521,000 - up from around $84,000 one year ago, this fell significantly short of analyst expectations who anticipated revenue to reach upwards of $2.3 million. 

Workhorse’s Q1 losses also climbed to $16.5 million - up from $9.1 million last year, although analysts were expecting a $19.8 million loss. 

One of the biggest impacts on the company’s bottom line came from its retrospectively poor decision to invest in Lordstown Motors. Subsequent chip shortages and other external factors have also led to Workhorse dropping its 2021 vehicle production targets from 1,800 units to 1,000 units. 

While these fundamentals make for worrying reading, there’s evidence that investors have factored in these setbacks into the stock’s share price. Having retraced some 81.75% from its 5th of February 2021 peak of $40.61 per share, market sentiment may now have decided that WKHS has been punished enough for its setbacks. 

As a forward-thinking electric vehicle manufacturer, Workhorse stands as an entirely different proposition to the likes of GameStop and AMC - but this means that the company’s emphasis on emerging markets has the potential to help it to retain its price better than its meme-based counterparts. Provided that WKHS turns a corner from its setbacks, the company’s stock may be in for a strong end to 2021.