What happened

After plummeting 53% in February, shares of Workhorse Group (WKHS 5.84%) continued to slide last month, falling 15%, according to data provided by S&P Global Market Intelligence.

Investors had high hopes that Workhorse Group would come away as a winner regarding its bid for a contract with the U.S. Postal Service (USPS) to help electrify its fleet of delivery vehicles. In January, for example, investors had driven Workhorse Group's stock 74% higher on the belief that Workhorse would win the award. Their optimism quickly faded, however, when the USPS ultimately decided to award the contract for Next Generation Delivery Vehicles (NGDV) to Oshkosh (OSK 0.05%) in February.

With his hands on his head, a businessman looks at a down-trending red arrow.

Image source: Getty Images.

So what

Workhorse Group gave investors something to celebrate when it reported fourth-quarter 2020 results in early March. The company reported revenue of $652,000 in the quarter, resulting in 2020 sales of $1.4 million -- a healthy increase over the $377,000 the company reported on its top line in 2019. And looking to charge up investors' optimism for the road ahead, CEO Duane Hughes said, "We're entering the new year in our strongest-ever position, both financially and operationally." Evidently, investors were pleased; shares closed more than 7% higher on the day of the earnings report than where they had closed the day before.

But the fanfare was short-lived. Investors' ebullience quickly faded when the company failed to provide meaningful commentary about the elephant in the room -- the USPS contract. There had been some indications of hope. On March 4, Workhorse Group provided an update to its discussions with the USPS, though there wasn't anything encouraging that the company reported. Instead, Duane Hughes stated that management "met with USPS representatives to discuss the award and further specifics of the USPS selection process, the details of which cannot be disclosed at this time."

WKHS Chart

WKHS data by YCharts.

Then, on March 23, investors who were hopeful that Workhorse still had a shot at the USPS contract -- worth up to $6 billion -- found additional disappointment. Speaking with Reuters, U.S. Postmaster General Louis DeJoy stated that the USPS had "thoroughly vetted and evaluated the decision" to award the contract to Oshkosh.

Now what

The decline in Workhorse Group's stock for the second consecutive month is a stark reminder that despite the market's overwhelming enthusiasm for electric vehicle (EV) stocks, investors face significant risk in adding the stocks of these unproven companies to their portfolios. There will likely be many winners -- and losers -- as the nascent EV industry grows, but investors should only consider positions in these growth stocks if they are cognizant of the related risks.