What happened

Shares of Workhorse Group (WKHS 0.72%) dipped 24.4% in May, according to data from S&P Global Market Intelligence. Many speculative, highly growth-dependent stocks saw significant pullbacks in the month, and the small-cap electric vehicle (EV) specialist participated in the pullback. 

WKHS Chart

WKHS data by YCharts

The company reported its first-quarter results on May 10, announcing that it had delivered just six of its electric-truck vehicles and recorded $521,000 in sales in the period. Workhorse is still a young player in an increasingly crowded field, so it's not surprising that its share price dipped last month as investors moved out of speculative stocks. More recently, the company's share price is surging thanks to receiving attention as a potential short-squeeze candidate, but there's a risk that the dissipation of its newfound meme stock status will leave investors holding the bag. 

A road sign with two intertwined arrows pointing up and down.

Image source: Getty Images.

So what

The EV market still looks poised for big growth over the long term, but a rush of new entrants to the space could make it more difficult for smaller players like Workhorse to establish a lasting position. While the company has been ramping up production and sales at an encouraging clip, it's unclear whether it will have staying power and go on to justify its valuation. On the other hand, that hasn't stopped the stock from posting huge gains following its sell-off in May.

Now what

Workhorse stock has surged early in June's trading. The company's share price is up roughly 55% in the month so far. 

WKHS Chart

WKHS data by YCharts

Due to its high short interest, Workhorse is attracting attention from investors who are hoping that the company will go on to be the next big short-squeeze play. Investors have scored big wins by backing troubled companies including GameStop, AMC Entertainment Holdings, and Bed Bath & Beyond, but trading this way remains very high-risk and could burn shareholders who buy on hype. 

Workhorse stock now has meme-stock momentum on its side, and it's possible that coverage surrounding the stock's explosive gains in June will attract more attention and drive the company's share price even higher. However, investors should keep in mind that the recent momentum for the EV stock seems to have little to do with the quality of the underlying business. This year has seen some incredible winners thanks to short-squeeze and meme momentum, but Workhorse looks like a very risky bet at current prices.