Beware of Workhorse Group Stock

Markets jumped on electric vehicle stocks in the last week because they have a very short-term memory. The EV bubble popped badly in Feb. when the Nasdaq corrected. Workhorse (NASDAQ:WKHS), where short-sellers have a 42% short float, jumped to over $15.

Expect the rally to fizzle quickly.

Investors speculated, wrongly, that Workhorse had a chance to win a multi-billion dollar EV truck supply deal with the U.S. Postal service. The company had no prior experience handling a contract of that size. So, when USPS chose Oshkosh (NYSE:OSK) instead, WKHS stock plunged.

Workhorse has no other major supply deals to bid on and win. It may have plenty of cash on hand and modest debt. But cash burn will continue.

Eventually, Workhorse will have to sell shares to raise cash. The EV hopeful has no long-term upside potential. The stock is entirely speculative. And just as investors should avoid an (allegedly) fraudulent firm like Nikola (NASDAQ:NKLA), they should avoid hoping for WKHS stock to rise.

Your Takeaway

The EV bubble popped earlier this year and could do so again. Markets will exit the EV long trade the moment WKHS stock plunges back to the high single-digit range. Speculators should get out of the stock before the other sellers do.