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Why Workhorse Group, Lordstown Motors, and Canoo Stocks Popped Today

By Howard Smith - Jun 2, 2021 at 3:35PM

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Potential agreement on infrastructure spending is boosting market sentiment for growth names in clean energy.

What happened

The market is experiencing a bit of a reversal away from value names in sectors like materials and industrials, and back into growth names today. Companies in the electric vehicle (EV) sector are reaping the benefits, with three EV stocks that have been beaten down so far in 2021 gaining today. Workhorse Group (WKHS -2.62%) and Lordstown Motors (RIDE -3.54%) were both more than 18% higher, and shares of Canoo (GOEV -2.56%) had risen 9% as of 3:45 p.m. EDT.

The gains are still barely making a dent in recovering the losses seen so far this year:

WKHS Chart

WKHS data by YCharts

So what

Shares of these electric vehicle companies are down for specific reasons, but also as the market rotated from high-growth names to more cyclical and value-oriented stocks. Today's gains may be signaling the shares have dropped enough for speculative investors to jump back in. But it also likely has to do with progress apparently being made between President Joe Biden and Republican negotiators for an infrastructure spending plan. 

white Workhorse C-1000 electric cargo delivery van.

Image source: Workhorse Group.

Though there have been offers and counteroffers, the original plan proposed by Biden included a $174 billion investment in the electric vehicle market. This included incentive programs for consumers, electric charging station infrastructure, and the electrification of 50,000 diesel transit vehicles. But lack of traction for these companies to this point is has driven shares lower year to date.

Now what

Workhorse Group was hit especially hard when it lost a bid for a 10-year U.S. Postal Service contract to replace its mail delivery fleet with new energy vehicles. Workhorse also reported its first-quarter 2021 financial update in May and missed expectations on sales with just six trucks delivered. 

Lordstown Motors has also received much criticism after a short-seller report questioned the validity of its orders and its production timeline. Lordstown's recent first-quarter release didn't do much to quell nervous investors, either. The company said that production will in fact begin on schedule in the fourth quarter of 2021, but volume this year would be "at best" 50% of previous estimates. In addition, the company said it is seeking to raise more capital to fund its start-up plans.

Canoo plans to produce a van-like lifestyle vehicle, a multipurpose delivery vehicle (MPDV), and a pickup truck. It plans to begin selling its lifestyle vehicle next year. It has yet to begin producing and selling its products, so losses are expected while it remains in its pre-revenue stage. For full-year 2020 Canoo reported a net loss of about $90 million, which was about half as much as the company lost in 2019. The market for the company's purpose-built vehicles remains uncertain, yet Canoo is currently still valued at a market capitalization of $2 billion. 

These speculative names are going to be volatile. Today's gains seem to be just a bit of a springback after recent news drove shares lower. 

Howard 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.

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Stocks Mentioned

Workhorse Group Inc. Stock Quote
Workhorse Group Inc.
WKHS
$3.72 (-2.62%) $0.10
Lordstown Motors Corp. Stock Quote
Lordstown Motors Corp.
RIDE
$2.45 (-3.54%) $0.09
Canoo Holdings Ltd. Stock Quote
Canoo Holdings Ltd.
GOEV
$3.81 (-2.56%) $0.10

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

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