Please ensure Javascript is enabled for purposes of website accessibility

Why Did Workhorse Group Stock Drop 12.6% Today

By Rich Smith - Feb 27, 2020 at 8:35PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The third time was no charm for this stock.

What happened

Shares of Workhorse Group (WKHS 10.69%) have enjoyed cat-like luck (you know, nine lives?) through much of the coronavirus crisis -- but on Thursday, Workhorse's luck ran out.

After initially falling Monday, Workhorse stock eked out small gains on both Tuesday and Wednesday, bucking the tide of an ebbing market. No such luck today, though. The stock just closed trading down 12.6%.

Workhorse logo

Image source: Workhorse Group.

So what

Why did Workhorse do so well earlier in the week, but not today?

The first question is easier to answer. Mid-Wednesday morning, Lordstown Motors, a new electric-car company founded on the remains of GM's Lordstown auto plant and licensing technology from Workhorse, inked a deal to sell 250 "Endurance" electric pickup trucks to utility FirstEnergy, according to InsideEVs

No word yet on whether more sales are in the offing -- and even this deal is still only in the form of a Letter of Intent and not yet an actual sales contract. Still, if all goes well, this development could be great news in the long term both for privately held Lordstown and for the company collecting royalties from it -- Workhorse Group.

Now what

As for the nearer term, though, consider the following:

Workhorse Group is a $270 million company with $25 million in net debt, less than half a million dollars in annual revenue and no profits whatsoever. It's exactly the kind of company that could be hurt badly by a coronavirus-fueled economic crisis.

With every other stock on Earth (seemingly) falling on fears that the coronavirus outbreak is the black swan event that pushes us into recession, it's only natural that an indebted, unprofitable company with still-tenuous growth prospects like Workhorse would be one of the casualties. 

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Workhorse Group Inc. Stock Quote
Workhorse Group Inc.
$4.35 (10.69%) $0.42
FirstEnergy Corp. Stock Quote
FirstEnergy Corp.
$40.83 (1.90%) $0.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.