EV and aviation infrastructure and technology company Workhorse (WKHS) reported its second-quarter 2022 earnings results, which did not meet the expectations of Wall Street, causing the stock to be 22% lower currently. However, the company hit one major milestone during the quarter and announced a key delivery update.
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Quarterly Numbers Disappointed Investors
The consensus estimate for revenues was $14.5 thousand, and the company generated about $12.56 thousand. Revenues were also much lower than the prior-year quarter’s revenues of $1.2 million. Moreover, sales were essentially zero, having reported a much higher cost of sales than the revenues themselves.
Coming to the bottom line, the net loss of $0.13 per share was wider than Street expectations of a $0.11 loss. However, the figure was up from last year’s net loss of $0.35 per share, which was a breather.
The company’s commentary on its product roadmap was also encouraging. Management noted that it is focused on new “last-mile delivery” introductions between 2H22 and 2024, which is on track regarding the timing and budget.
Operational Details: Surging Operating Costs
The company made fresh additions to its workforce during the quarter, including leadership-level appointments, which led to an increase in employee costs. A year-over-year rise in legal fees added to operating costs, which stood at $18.06 million for Q2, a 98% surge year-over-year. Its loss from operations was also a massive $21.2 million, though narrower than the $22.7 million loss recorded in Q2 2021.
The company, though faced with various operational setbacks, focused on improving its financial position, which it did. By the end of Q2, Workhorse had $140 million in cash balances with no debt on its balance sheet, which is quite impressive for a technology company facing massive operational costs.
What Does WKHS’s Future Look Like?
For the full-year 2022, management at Workhorse forecasts $15 million – $25 million in revenues, supported by the sale of 150-250 vehicles.
“Our results demonstrate the steady progress our team is making as we execute on our product roadmap, invest prudently in our operations, and preserve our financial position, which will allow us to deliver enhanced value to our customers and shareholders,” noted Bob Ginnan, CFO of Workhorse.
Moreover, the recently passed Inflation Reduction Act is also welcome news for Workhorse, which management expects to support EV demand.
What Happened with Workhorse?
The company has been weighed down by operational inefficiencies for quite some time. In September of last year, WKHS suspended deliveries and recalled the delivered units of its C-1000 vehicles after identifying numerous inaccuracies in the design and production process.
Following this, Workhorse announced that it is focusing on completing the modification and testing process of the model by the end of Q4 2021. However, investors were disappointed after getting no update on this way past the deadline.
Interestingly, in the Q2-2022 earnings commentary, management mentioned that it expects to complete the build-out of C-1000 by the end of 2022, which might lift some spirits, but as of writing, investors are not convinced. WKHS stock is currently down 22% on the day.
What is the Price Target for Workhorse Stock?
As of now, Wall Street is cautiously optimistic about Workhorse, with a Moderate Buy rating based on two Buys and two Holds. The average price target for WKHS stands at $6.25, suggesting 77.8% upside potential from current levels.
Conclusion: Is WKHS a Good Stock to Buy?
Though Workhorse seems to be burning an immense amount of cash and is falling behind on expected production dates, the company has managed to eliminate debt from its balance sheet in Q2. Granted, the numbers look uninspiring, but there are quite a number of hidden positives that should be noted. Therefore, investors should consider looking deeper into the stock.
