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In recent times, Workhorse Group (NASDAQ:WKHS) has been in focus among investors and market watchers. The company, which is involved in the electric vehicle space, saw its stock tumble to around $19 a share from $30 a share recently. Despite that, the stock has delivered significant gains this year and is up by as much as 536% in 2020.
Negative Development
Earlier this month, there was a development that seems to have been the trigger behind the decline in the Workhorse stock. On October 8, Fuzzy Panda Research released a scathing report on its rationale behind shorting the Workhorse stock.
In its report, Fuzzy Panda stated that the chances of Workhorse actually winning the potentially multibillion-dollar United States Postal Service contract are quite remote. The report went on to state that if the company does not win that contract the shares may suffer considerable declines.
However, it is also necessary to note that Workhorse has a 10% stake in Lordstown Motors and once it does go public by way of a merger, it is going to be a positive trigger for Workhorse stock. Workhorse might see its stake multiply after Lordstown goes public but it is unlikely to make a considerable dent to the company’s long-term prospects.
No Response from Workhorse
It is hard to figure out the chances of Workhorse getting the contract from USPS. However, it should also be noted that Workhorse did not respond to the report from Fuzzy Panda. The USPS is not going to announce anything until December and it remains to be seen how the Workhorse share performs until then.
In the meantime, the Lordstown merger is a potential positive trigger for the stock. Although it is expected to be a positive development for the company, it cannot alone be the basis of a bullish call on the Workhorse stock.
The Stock
In such a situation, it is only natural that many investors might be in two minds. On one hand, the report from Fuzzy Panda has stated that the chances of getting the contract are low. However, at the same time, there is nothing definite.
On the other hand, the stock price is declining on the back of the report and many might feel it’s a buying opportunity. Hence, although the situation for Workhorse with regards to the USPS contract might not be clear cut, it may be a good idea to stay away from the stock at this point.
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