PreMarket Prep Stock Of The Day: Workhorse Group

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

Thursday's PreMarket Prep Stock of the Day is one of our most discussed in recent weeks: Workhorse Group Inc. WKHS. 

The Company: Workhorse Group Inc is a technology company that designs, develops, manufactures and sells high-performance, electric medium-duty trucks. 

The company's products include the E-100 and E-GEN delivery vans; HorseFly delivery drones; and telematics systems. 

The company generates key revenue from the automotive segment, which consists of sales of any of its E-GEN or E-100 platforms.

The Fundamentals: Workhorse posted a first-quarter EPS beat on May 6 of 20 cents — from an expected loss of 13 cents to a gain of 7 cents — and revenues of only $84,300. 

This was the company's second consecutive EPS beat as well as its first positive EPS number after a string of 12 quarters in the red going back to the end of 2017. 

The Reason For The Workhorse Rally: It has a story. The stock is moving higher for one reason only, and that's fear of missing out, or FOMO.

With the constant acceleration of Tesla Inc. TSLA — and more recently the parabolic move in Nikola Corp NKLA, a designer and manufacturer of battery-electric and hydrogen-electric vehicles as well as the components to make them — Workhorse is a must-own for many investors,

Nikola ended 2019 at $10.32, reached $93.99 on June 9 and is now trading in the $70 area. 

Workhorse Price Action In June: After ending May at $2.48, the issue crept higher in the early part of the month, closing over $3 on June 3 at $3.24. Following a brief pause at the area, it cleared $4 for good on June 16, closing at $4.40 and more than doubled in the next seven sessions, peaking at $10 on Wednesday and closing at $8.51. 

When To Sell A Rocket Ship?: When Workhorse was being discussed on the show Thursday, it was trading at the $9.50 area with a premarket high just above at $9.73.

Since the issue had closed $1.50 off the previous day’s high ($10), it was going to be a major hurdle to clear for the shocking rally to continue.

The reason was that buyers who were trapped all the way from the close ($8.51) to $10 would be looking to mitigate their losses on a rally.

Workhorse's Corresponding Price Action, Potential Double Top: In a volatile session, the issue swooned off its higher open Thursday, but within minutes found support just above Wednesday’s close at $8.52.

On the rebound, it was able to exceed the premarket high and made a new high for the move at $10.25.

Unfortunately for investors who did not take advantage of the rally, they may now be forced to exit into a falling market, which is much more difficult. 

In order for the rally to continue, bulls need to take the over issue over a potential top ($10 and $10.25).

The stock ended Thursday's regular session 0.59% higher at $8.56 and was gaining 7.36% in an after-hours rally to $9.19 at the time of publication. 

The full discussion of the issue on today’s show can be found here:

Photo courtesy of Workhorse.