What happened

Shares of Workhorse Group (WKHS 0.72%) traded up more than 10% on Friday following an endorsement from a Wall Street analyst. It has been a tough stretch for Workhorse, with shares down nearly 60% since mid-February, but not everyone is ready to give up on the electric vehicle start-up.

So what

Workhorse is focused on electric trucks and delivery vehicles, and investors coming into 2021 had high hopes that the company would win at least part of a massive $6 billion contract to modernize the U.S. Postal Service delivery fleet. But on Feb. 23, the post office picked a different company for the contract, taking the wind out of Workhorse's sails.

Generic picture of an electric delivery vehicle.

Image source: Getty Images.

But B. Riley analyst Christopher Souther says not all hope is lost, and today initiated coverage on Workhorse with a buy rating and a $20 per share price target. In a note entitled Workhorse Can Deliver Even Without the Post Office, Riley argues that the company's delivery vehicle will beat most of the competition to market, and its large cargo area makes it an attractive option for a lot of potential customers.

Now what

Even without the government order, Workhorse has a backlog of more than 8,000 vehicles worth about $600 million in future revenue. There is clearly still a potentially viable business in Workhorse, but unless the company can get the post office to rethink its award decision, the hoped-for shortcut to success is gone.

Workhorse faces competition from well-established incumbents and well-funded start-ups. Souther believes its products are good enough to win their fair share of business. Investors buying in better hope he is correct.