On Tuesday, Roth/MKM expressed a cautious stance on Workhorse Group (NASDAQ:WKHS) shares by lowering the price target on the company's stock to $0.22 from the previous target of $0.30. The firm continues to hold a Neutral rating on the stock of the electric vehicle manufacturer.
The revision follows Workhorse Group's reported shortfall in first-quarter 2024 revenues, which were impacted by slower than expected deliveries. Additionally, the company's outstanding shares have surged to 376 million, up from 315 million at the end of 2023. This 61 million increase in shares represents a 23% dilution for shareholders within less than five months.
The terms of a recent financing deal on May 10, which raised $6.3 million for Workhorse, also played a role in the reassessment. The financing agreement set an equity conversion price at or below $0.1367 per share, which is notably lower than the closing price of $0.21 on May 9.
Roth/MKM's analyst underscored the importance of Workhorse management's ability to minimize equity dilution and to foster revenue growth. The firm indicated that these factors would be pivotal before it would consider revising its rating on the stock.
The analyst's comments highlight the current financial strategy and market performance of Workhorse as key areas of focus for potential investors and stakeholders.
InvestingPro Insights
Amid the cautious outlook from Roth/MKM on Workhorse Group (NASDAQ:WKHS), InvestingPro data brings additional context to the electric vehicle manufacturer's situation. With a market capitalization of $80.71 million and a significant revenue growth of 90.1% in the last twelve months as of Q1 2024, Workhorse's financial health is a mixed bag. The company's stock has experienced a strong return over the last month, up 37.01%, potentially indicating investor optimism in the short term. However, this optimism should be tempered by the stock's high price volatility and the fact that analysts do not expect the company to be profitable this year.
Workhorse's cash position is a critical factor, with InvestingPro Tips highlighting that the company is quickly burning through cash. This aligns with the recent financing deal and equity dilution mentioned in the article. Additionally, Workhorse's gross profit margins have been weak, at -217.61%, showing that despite top-line growth, profitability remains elusive.
For investors looking for deeper analysis, there are additional InvestingPro Tips available on the platform, including insights on Workhorse's debt levels and valuation multiples. To explore these further and make informed investment decisions, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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