Power surge

06/30/20
  • WKHS doubled in six days, stock added to Russell 3K
  • NKLA up more than 100% since June 4 debut
  • Too high, too fast, or a new industry’s natural surge?

Tesla (TSLA) may be synonymous with electric cars in the public consciousness, and its stock is definitely a trader favorite, with average daily volume in excess of 14 million shares. Oh yeah, and it’s up more than 340% year-over-year.

Recently, though, it’s taken a back seat to other electric vehicle makers whose stocks have been cranking up the voltage to unprecedented levels.

Electric pickup-truck maker Nikola (NKLA) is more than double where it was in early June when it began its official trading life (see “IPO mini-boom makes noise”), while competitor Workhorse (WKHS)—after surging more than 50% intraday on Monday and hitting a new record high—was up more than 300% since June 4 and more than 900% from its March low:

Chart 1: Tesla (TSLA), Nikola (NKLA), Workhorse (WKHS), 6/4/20–6/29/20. Tesla (TSLA), Nikola (NKLA), Workhorse (WKHS) daily price chart. Electric vehicle makers on a roll.

Source: Power E*TRADE


Not that TSLA has anything to feel bad about. It’s trading around the $1,000 mark, a stone’s throw from its record high, and up around 170% since March 18. (By the way, TSLA’s IPO was 10 years ago yesterday—it debuted at $17.)

But the moves in NKLA and WKHS, especially the latter, may signal there’s even more investor (and trader) appetite for this burgeoning market than previously thought.

WKHS, which has been around since 2010, had climbed as high as $11.70 in 2016 before dropping to penny-stock territory ($0.37) during the December 2018 sell-off. And now? Although it had already doubled off its mid-March low of $1.47 by early May, the stock really took off in the past couple of weeks—rocketing more than 200% from $4.88 on June 19 to yesterday’s high of $15.41:

Chart 2: Workhorse (WKHS), 3/16/20–6/25/20. High-voltage June.

Source: Power E*TRADE


That move was accompanied by news yesterday that WKHS had been added to the Russell 3000 broad-market index.1

Earlier this month the stock picked up some press even as it was seemingly trapped in newcomer NKLA’s shadow. While both companies specialize in trucks, WKHS current niche is commercial vehicles, and it’s list of clients includes FedEx, UPS, and DHL Worldwide Express.

One hedge fund that described the stock as “undervalued” (on June 19 when it was trading around $5) pointed out that in addition to this apparent coup, WKHS has an investment in privately held pickup-truck maker Lordstown Motors, which is currently expected to get its vehicle out on the road before Nikola.2

Is the electric vehicle market on the cusp of finally turning the corner, as boosters have claimed (for decades) it was destined to do? There’s obviously more than a little interest on the Street these days, as the recent market action suggests—WKHS volume approached 100 million shares yesterday.

The industry may, finally, be coming into its own. But that doesn’t mean it’s on a one-way road—stocks get overbought and oversold on a near-term basis all the time. (Don’t forget, TSLA fell more than 50% between December 2018 and June 2019 before taking off on its history-making rally). Smart traders don’t chase “hot,” they pick their spots.

Today’s numbers (all times ET): S&P Case-Shiller Home Price Index (9 a.m.), Chicago PMI (9:45 a.m.), Consumer Confidence (10 a.m.).

Today’s earnings include: Conagra Brands (CAG), FedEx (FDX).

 

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1 BusinessInsider. Stock Alert: Workhorse Touches New High After Placed In Russell 3000. 6/29/20.

2 Bloomberg.com. Workhorse’s Nikola-Like Investment Undervalued, Hedge Fund Says. 6/19/20.

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