Workhorse Group vs. Lightning eMotors: Which Electric Vehicle Stock Is a Better Investment?

A pullback in stock prices may allow you to purchase shares of a company at a lower valuation multiple. But investors should carefully consider the reasons behind the decline. For example, several electric vehicle (EV) stocks have underperformed the broader markets in 2021 after a monumental run last year.

Investors were concerned about steep valuations for a majority of these stocks. Alternatively, EV companies based out of China were hit harder due to the ongoing crackdown of the government on entities primarily part of the tech space. But, as the EV space is set to experience stellar growth in the upcoming two decades, investors have the opportunity to identify quality stocks at cheaper prices that can derive exponential returns over the long-term.

Keeping these factors in mind, is Workhorse Group (WKHS) or Lightning eMotors (ZEV) a better EV stock to buy today?

Workhorse Group is a high-risk bet

Shares of Workhorse Group have declined by 66% year to date and are currently trading 84% below its 52-week high. Workhorse Group had a 10% stake in Lordstown Motors, a company that is under investigation by the U.S. Department of Justice for misleading investors. 

In 2019, Workhorse and Lordstown collaborated to form a technology licensing agreement. Due to the steep decline in the shares of Lordstown Motors, Workhorse has booked several millions in non-cash charges in the last two quarters.

In July 2021, Workhorse disclosed the departure of CEO Duane Hughes and also withdrew its guidance of an expected vehicle production of 1,000 units for 2021. In Q2 of 2021, it reported revenue of $1.4 million, significantly lower than sales of $6.4 million forecast by analysts. Further, Workhorse’s net loss stood at $0.35 per share, higher than the loss of $0.29 per share estimated by Wall Street.

Last month, Workhorse also recalled 41 of its C-1000 vehicles as well as suspended upcoming deliveries. These developments have shattered investor confidence exacerbating the sell-off in the stock this year.

Valued at a market cap of $800 million, Workhorse is forecast to report sales of $83 million in 2022. But these estimates seem overly optimistic given the issues surrounding the EV manufacturer.

Lightning eMotors stock is down 53% from 52-week highs

Valued at a market cap of $575 million, Lightning eMotors designs, manufactures and sells EVs. Its vehicles include passenger vans, ambulances, last-mile delivery vans, shuttle buses as well as motor coaches among others. Lightning eMotors also manufactures powertrains for commercial EVs.

In the second quarter of 2021, Lightning eMotors reported revenue of $5.9 million and a net loss of $46.1 million or $0.79 per share. Comparatively, analysts expect revenue of $5.37 million and a loss of $0.14 per share.

Lightning eMotors explained the company’s revenue was lower than expected due to supply chain disruptions. As legacy automobile manufacturers including Ford (F) and General Motors (GM) had to lower production in Q2, the number of powertrains installed by Lightning eMotors also declined significantly. Lightning eMotors also withdrew its full-year guidance for 2021.

In the June quarter, Lightning eMotors delivered 36 commercial EVs compared to nine in the year-ago period. The company confirmed its order backlog stands at 1,600 units which will bring in over $168 million in sales.

In Q3, Lightning eMotors expects vehicle and powertrain sales to range between 28 and 40 units. Its revenue is forecast between $4 million and $6 million while adjusted operating loss is estimated between $12 million and $13 million.

The verdict

While both the companies are not yet making a profit, Lightning eMotors seems a much better bet, given that Workhorse is grappling with many management-related issues, in addition to its recall of its EVs.

Further, Lightning eMotors is expected by Wall Street to increase sales from $27 million in 2021 to $203.7 million in 2022. Comparatively, its loss per share might also narrow from $2.51 to $0.44 in this period.

WKHS shares . Year-to-date, WKHS has declined -66.23%, versus a 22.51% rise in the benchmark S&P 500 index during the same period.

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.

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