Analyst uses recent retail investor frenzy that has skyrocketed so-called memes stocks as an opportunity to take profits in
Stock. If you own stocks, you might want to take his advice and sell, at least a little.
Cowen analyst Jeffery Osborne downgraded the commercial electric vehicle maker’s shares to Hold from Buy on Friday. He left his price target unchanged at $ 13 per share. Osborne lowered the title rating due to recent gains fueled by the rally of memes.
On Friday, Workhorse stock (ticker: WKHS) rose more than 60% in the last five trading days. A large rally in even heavily shorted stocks seems to have been the catalyst.
(AMC) increased by around 160% over the same period.
The Osborne decommissioning cooled the Workhorse rally. Shares were down around 12% by noon on Friday. the
Dow Jones industrial average,
for comparison, increased by 0.7% and 0.3%, respectively.
While the Memes-fueled rise of Workhorse was the event that prompted Osborne’s downgrade, Cowen’s analyst noted that competition in the EV business is on the rise and he sees no new factor that could drive up the stock.
With the downgrade of Osborne, 25% of the eight analysts covering the company’s shares are buying. The average purchase ratio of S&P 500 stocks is around 55%.
In June 2020, all four analysts covering the company rated the Buy shares. In July, Barron wrote positively about the action, saying the Workhorse stocks were a good way to play on EV trends and that there were great opportunities ahead for the action. One of those opportunities was a contract to replace US Postal Service delivery vans. The shares were trading around $ 15 when this article was published.
The shares traded north of $ 40 in January amid a market-wide short squeeze. At that time, we suggested long term holders to take profit.
This higher march was interrupted by the decision of the post office. USPS awarded the contract to
(OSK), not Workhorse, which confused some analysts. Oshkosh’s bid was neither electric nor hybrid, a priority for President Joe Biden, who has spoken of making public vehicles electric for environmental and economic reasons.
The loss of the contract caused Workhorse shares to fall, and rising interest rates hit all EV inventories hard in February, including Workhorse. Higher rates make it more expensive to finance growth. Higher rates also tend to lower valuation multiples.
Workhorse stock started this week below $ 10 a share. The recent rise offers investors a break. When stocks hit $ 40 in January, Barron said there were three options for fundamental-minded investors: do nothing, sell everything, or sell a little. We recommended that shareholders sell a bit.
This is still our point of view today. Fundamentals don’t rule the stock. Recent gains are driven by business trends. Long-term holders may want to take a little more cash off the table, as Osborne suggests.
Write to Al Root at [email protected]