by Travis Johnson, Stock Gumshoe | August 24, 2017 2:56 pm
Apparently, there’s some kind of profit window that “slams shut” on September 30th, according to Christian DeHaemer[1], and you have to buy this $3 “disruptive technology” stock before then. So what the heck is he talking about?
Let’s investigate…
The pitch is for Crisis and Opportunity[2] (now being sold at $1,599/year), and it’s all about drones[3]. DeHaemer notes that there will soon be “countless drones” performing missions all around the country, and that “they’re about to wreak havoc on a $246 billion industry.”
That’s a stiff price to pay just to find out about a “secret” stock, and if you pay $1,599 you’re probably going to be inclined to swallow the whole lure and believe the story with perhaps a bit too much ardor… so let’s see if we can name the stock for you, give you a chance to think about it for yourself a bit. Then, if you want, feel free to subscribe to DeHaemer’s newsletter with a fresh and clear mind, free of the cloud that a lust for 1,000% returns creates in your noggin.
Apparently the reason this little microcap company is favored is that the FAA is slowing down bigger companies… here’s a bit from the ad:
“Google, Amazon, and Wal-Mart want in on the action. But the Federal Aviation Administration (FAA) is in the way.
“The problem: The agency has a little-known rule that prevents these Fortune 500 companies from cashing in on the upcoming disruption.
“Right now, they’re working night and day to get the FAA to roll back its rule.
“But you know how government agencies work… SLOWLY.
“So, while these multibillion-dollar corporations are wallowing in red tape, one microcap is quietly gaining first mover advantage over them.
“The reason?
“This Company Doesn’t Have to Worry About the FAA’s Rule”
The next bit of clues sounds like an annoying riddle:
“It’s in the trucking business, but it doesn’t haul anything.
“It makes applications for aerospace, but you won’t find its components on any NASA spacecraft.
“And it specializes in a niche market of information technology that’s about to turn a $246 billion industry on its head.”
So what is this $3 stock that DeHaemer thinks will be at $30 by early next year? Let’s see if we have any other clues to work with…
First he tantalizes us with tales of past “disruptors” that turned into 10,000%+ gainers — Apple and Netflix and Amazon, which are all, of course, household names now. Those kinds of comparisons are made all the time, of course, but it’s a heckuva lot easier to pick past disruptors than it is to pick future disruptors — any industry ripe for disruption is, of course, going to have lots of folks trying to grow and change things, not every attempt works and only a teensy weensy percentage of the small companies that are trying to bring a big change actually grow into meaningful industry-leading giants like those three.
So what’s this “$246 billion industry” that the $3 “secret” stock is going to upend? Parcel delivery… so this is a company that’s somehow involved with drones and parcel deliveries.
Other clues? DeHaemer says that this drone company helps delivery firms like UPS or the US Postal Service solve those “last mile” problems — reducing the cost of getting those promised deliveries to the most inefficient rural addresses… here’s more from the ad:
“The Ability to Automate Deliveries to Far-Flung Rural Areas Will Save Companies Like UPS Millions
“In fact, UPS estimates that if every one of its 66,000 drivers were able to shave just a single mile from their route every day, the company would save $50 million annually.
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just click here...“And that’s why UPS tested this $3 company’s drone technology back in 2016.
“The test was a success, and to say that UPS was thrilled with the results would be an understatement.
“‘What’s exciting is the potential for drones to aid drivers at various points along their routes,’ said Mark Wallace, a senior vice president at UPS. ‘This is a big step toward bolstering efficiency in our network.'”
And the FAA rule that is hinted at in the beginning is the “line of sight” rule — the rule that’s keeping a lid on things by making sure that drone operators always have visual contact with their drones, which apparently means Google and Amazon are out of luck. Here’s more from DeHaemer:
“This system ensures that either the delivery truck’s driver or their assistant will be within the line of sight of the delivery drone.
“Here’s how it works from a technical standpoint:
“The drone launches from the roof of the delivery truck, rises to a cruising altitude, and uses GPS to steer to its destination.
“Once there, the remote pilot guides the release of the package.
“Then, the drone uses infrared tracking to navigate back to the delivery truck where it docks and recharges via the truck’s onboard battery[4], making it ready for its next mission.”
OK, so that sounds pretty cool, at least. Though I imagine it’s more compelling for delivering small and light parcels (paperback books or phone chargers, not barbells or printers).
What else do we learn about this company? Apparently it also makes gas-electric pickup trucks, and a cloud-based monitoring system for truck fleets. Those pickup trucks apparently are in some demand, he drops hints about orders:
“… customers like Duke Energy, Portland General Electric, the Southern California Power Authority, Clean Power Ohio, and the City of Orlando have preordered over 4,650 of these trucks.
“They’re due to come online in 2018 — a full two years before other truck manufacturers can get their electric trucks to market.”
I have no idea whether that competitor assessment is true, but it is a good clue. And DeHaemer also says that the company has delivery trucks in testing to possibly replace the USPS fleet — it’s apparently one of six bidders who are offering electric trucks with satellite telematics (which offer, we’re told, much lower maintenance costs) for this $6.3 billion contract that will be awarded next year.
Then, just to get to the goofiness, we’re told that this company is going to release a “flying sportscar” for $200,000 in 2019, one that they debuted at the Paris Air show this year — it basically looks like a giant four-copter drone.
So that’s more than enough in the way of clues — what the heck is DeHaemer talking about here?
This is, sez the Thinkolator, the little $100 million Workhorse Group (WKHS)[5], which has actually been around for a while — Workhorse was the name of a chassis supplier for GM and Navistar that has been around for almost 20 years but has changed hands a couple times. Most recently, the Workhorse name and chassis plant were bought in 2015 by a vehicle electrification company called AMP Electric Vehicles (used to be AMPD), and the Workhorse name and ticker change coincided with the company’s shift to developing electric fleet vehicles.
And yes, they have developed not only an electric range-extended step van that they’re testing with UPS, and selling in relatively small quantities, but a drone launching/management system that they call HorseFly that does indeed enable delivery by drone from the roof of a UPS truck. You can see the story (and a video of the operation) here[6]. I suppose that has some advantage over airborne blimp “mother ship” drone systems or warehouse-based drones that have been talked about, at least when it comes to near-term feasibility, but I have no idea whether or not UPS or anyone else will move ahead with meaningful adoption of this just-being-tested technology anytime soon. The HorseFLy sounds like it’s probably a fairly dramatic investment for a relatively marginal return in terms of increased efficiency… though all big changes to business processes sound like that at first, so I guess you’d have to have some faith that this is just the first phase of a revolution.
But that HorseFly is probably not going to be the near-term driver for the company — my guess would be that it’s probably fourth on the list, behind the step van that is their current commercial product (mostly for UPS so far, though they have a couple other preliminary customers), the Postal Service vehicle they’re delivering in prototype form next month, and the light duty W-15 pickup truck that they’re developing based on the R&D that went into their USPS prototype. What Workhorse really builds right now is the custom chassis and electric vehicle drivetrain (and the telematics system, if customers want it), and partners build and customize the rest of the van.
You can see the transcript of the August 9 update conference call from the company here[7], they do have a meaningful backlog of delivery van orders, mostly for UPS, but they don’t appear to be particularly close to turning this into a profitable enterprise. This is very much an early stage industrial company, and it seems like they need a lot more scale for the electric vehicle chassis business to make sense — that’s no surprise, they talked some about[8] it in their annual update for 2016, but even in their most commercial product they’re effectively selling a $50,000 truck that costs them $100,000 to build (I made those numbers up, but that’s what their best gross profit margin has looked like, and that doesn’t account for SG&A or R&D expenses). It’s not an insoluble problem, much greater volume could go a long way to solving it as they ramp up, get better deals from suppliers, and do the bean counting that every manufacturer has to focus on in relatively low-margin industries like this.
There’s a lot of work and capital that will be required to get them over the hump, and they won’t be generating any profit from these initial 200-vehicle orders (that’s their most important UPS order, being fulfilled now).
Probably the post office truck is the most compelling near-term catalyst — news should be coming in the Spring, either good or bad, they say their prototype will be ready next month and that the USPS will be ready to make a decision after testing the five prototypes from different companies for six months. So perhaps that “urgent” September 30 date is related to expected news flow about their delivery of that prototype to the USPS.
Before we know anything about whether the Postal Service likes the truck, though, they’re likely to have a substantial capital catalyst or two — they either need a big partner or a big capital infusion to get up to scale with their pickup truck design, which they hope to be building by the end of next year, and even without that larger product buildup they need operating capital right now. At their current cash burn rate, they should be in need of capital before they report their next quarter — and they may be raising it now, they do have the current $25 million “whenever” offering sitting with Cowen. Ideally, before they have to raise a much larger chunk of cash than that (which will be fairly soon), they’ll be able to get the kind of cachet that Tesla has, with fleets pre-ordering and consumers lining up to spend $1,000 on a preorder for their (anticipated) $50,000 electric and carbon-fiber pickup truck, and ideally, again like Tesla, investors won’t care about the fact that they’re not profitable and are going to need to raise a lot of money to get up to speed with manufacturing.
I don’t know if it will work or not, but I’d be more comfortable waiting to see what their next financing event is before jumping in — they filed back in June to sell up to $25 million “from time to time” of their authorized $150 million shelf registration, and there will almost certainly be some big hiccups along the way, so I think the odds of this being a rocketship on September 30 are pretty low. Not impossible, of course, but low, at least from my skeptical perspective… and while there is at least one analyst covering the stock who has it at a buy (Cowen, which is the banker that’s also handling that $25 million in equity that might be sold at any time, with a $5 price target), the idea of this being a $30 stock by early next year does seem to be a little silly.
That kind of huge gain would probably require winning that Post Office contract and getting a big capital infusion on good terms, and becoming an investor darling that gets bid up on a junior version of Tesla enthusiasm, which is clearly at least partially their goal (they’d like to be evaluated as a startup technology company that’s making exciting progress in drones and electrificiation, not a capital-intensive manufacturer that’s fighting for orders and bean-counting on costs). Exciting things are possible, of course, particularly with a little $100 million company that is very much a “story” stock, but I’m not particularly eager to buy the stock at $3 right now.
Your mileage may vary, though, as they say, so let us have it — what do you think? Ready for exciting breakthroughs from Workhorse? See other hiccups we should think about? Let us know with a comment below.
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USPS oit of the fifteen companies that qualified to submit proposals, the six that were chosen are AM General, Oshkosh, Utilimaster, VT Hackney, Turkish commercial vehiclebuilder Karsan, and India’s Mahindra, which has a major technical center in Troy, Michigan.
The USPS says that half of the prototypes will feature hybrid or alternative fuel powertrains. VT Hackney will be teaming up with Workhouse, which has a range-extended electric chassis currently used for a United Parcel Service truck — not to mention a drone-equipped concept — while AM General’s submission will offer a zero emissions option.
Thanks, Travis. Horsefly–bad choice of a name. My first thought is “Very annoying biting insect that I try to avoid”, and then there’s “This scheme will work when horses fly.”
Thinkolator not much needed for this one: https://www.pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=PressReleases&id=1487687844847-162
Fast forward 3 years later and this stock is at $20.
Together, the six companies will build a total of 50 prototypes at a combined cost of $37.4 million. They’re due by September, 2017, after which they’ll undergo six months of testing in a variety of climates and environments. Production of the winning entry or entries is scheduled to begin in late 2018, but they could have some competition, as the USPS will soon issue a request for proposals for an off-the-shelf delivery trucks based on existing production vehicles that will also be evaluated for use in its fleet.
After all MAGA statements this year, I hope the USPS RFP specifies at least 75% USA manufactured content.
We have not addressed transportation efficiency well. Smart Cars and Teslas are fine for consumers. For businesses, is a Carbon-fibre and electric vehicle the answer? Seems a little “advanced”. How about hybrid – fuel and electric, with aluminum/fibreglass for weight and efficiency?. The weight of batteries and distance limits are a concern for electric only. Any transportation experts out there?
My understanding is that delivery vehicles daily drive a distance that can be easily met by battery electric vehicles. As you note, consumers are even easier. Most people in the U.S. and EU drive fewer than 40 miles a day. Any of the current highway-capable EVs on the market can easily do that and charge a couple times a week at home. For fleet vehicles like delivery vans, the logistics are even easier since the routes are known and they’re parked overnight at a commercial facility that can easily add chargers.
I would be very careful. Back in the day I subscribed to a Dehammer letter and he touted a motorcycle company that promised outrageous gains. I was not disciplined in those days and lost a large chunk of money following his advice
I lost money on these scam tours too so I now have subscribed for a lifetime stockgumshoe membership and am now making money and saving money. Thank you Travis for what you do.
Deutsche Post already builds and operates it’s own electrical vans in Germany and sells to third parties. Production capacity will be 20 000 by the end of this year. Dt. Post also entered into a collaboration with Ford, to build a larger delivery van.
Range is just 80km, so it’s strictly for city deliveries. It’s also very cheap and very bare bone (just one seat, no radio, no air conditioning).
The interesting thing is that no German manufacturer was willing to build a van according to their specs and price expectations. So they bought a Technical University start-up and did it themselves.
The resistance to EVs is both illogical and backwards thinking. EVs are clearly the future of transportation. Battery costs fall in half every 10 years. Because of that, within 20 years, it will cost less to build an EV than a combustion car. At that point almost no one will buy a combustion car since it already costs 1/3 as much to operate an EV. When EVs cost less to buy or lease, then simple economics takes over.
An intelligent car maker would spend the billions of dollars needed to build large battery factories to further reduce battery costs, exactly as Tesla has done with the Gigafactory. Gigafactory further reduces Tesla’s battery costs by 50%. None of the old combustion car companies are doing that. Their intellectual property and capital is tied up in combustion engines, and they have too much inertia to overcome.
Americans like big fast cars and pick-up trucks, the roar of a powerful engine. There is a certain crowd that will embrace EV’s but not enough mainstream to support transition. Plus re-charging stations need to be built everywhere and more coal plants to supply the charging. i remember living in CA when they put charging stations in malls and places, now all abandoned eye sores.
My Nismo Leaf kicks butt on my ’09 Challenger RT for instant throttle torque, I charge overnight at home for the same juice as a vacuum cleaner.. again overnight when people are not using electricity. (no new coal and nuclear necessary, thank you) I have solar financed at less than I used to pay an electric bill, and the power company sends me a check every month. Just because everybody else is slow to the party doesn’t make either Tom or Jeff wrong. I test drove a Saturn EV-1 with lead acid batteries at age 30, I had to wait to age 50 to be able to buy a Leaf. The ship will turn, but so far it’s been a big ship that turns really slowly. (I have 3 1970 muscle cars too, but my ’09 was already a dinosaur when I got it for sentimental reasons.) I just can’t let the “more coal plants” comment go unchecked. It’s a reactionary talking point. Yes, though mass local charging stations are as obsolete as my Challenger by ever increasing range from home.
My suggestion is, there are several battery companies rushing to re-engineer the battery packs for these vehicles! The technology is already here with Toyota, Panasonic, Samsung and several others already making the batteries more durable and last longer in travel as well as use in cold weather! I suspect that the batteries being used in the future will have a SOLAR panel somewhere on the back or top of the vehicle that will continuously restore the battery with energy. By doing this, the vehicle continues to run with worry of running out of electricity. Having a backup fuel will be stored in a 10 gallon tank that will be used for emergencies or extended driving time! That’s where I see these vehicles going into the future…
Rich D
I agree with Dave S. If and when the RFP’s are released, to me the main issue is what company can comply with it and make a profit. When that’s determined the thinkolater should get involved and serious about it. BUT Horesefly???? Give me a break.
What gets me about the whole drone for last mile delivery idea is that none of the enthusiasts ever mention the noise issue. Have you heard these things? Even the simple camera drones make an enormous racket. One with enough power to lift a two pound parcel will surely be even noisier.
I live in a fairly typical London street of perhaps 150 houses populated in the main by young families most of whom use Amazon and the online groceries with great frequency judging by the number of vans in the area 12 hours a day. The idea that the residents here would put up with the noise of dozens of drone deliveries just does not fly. It has been mooted here that autonomous drones would take routes over back gardens in order to avoid the risk of them hitting pedestrians on busy streets. The back gardens are where people go to escape the noise on the streets.
Another significant factor in London is that in densely built commercial districts many employers are banning the delivery of employees private parcels to the office blocks due to the increase in traffic and pollution from the delivery vehicles. This might appear to be an opportunity for zero emission drones but how are they going to get through those revolving doors?
http://workhorse.com/newsroom NSDQ, Updated Aug 25,2017 03:59 WKHS $3.25, www:workhorse.com 100 Commerce Drive Loveland, OH 45140 Phone: 1-844-937-9547 Email: Julio.rodriguez@workhorse, com
HorseFly Above Truck
Category
Specs
Empty Weight
9.5 lbs. [without battery]
Payload Volume
0.6 cu. ft.
Configuration
8-Rotor Octocopter
Guidance System
Autonomous GPS and Compass (in-flight)
Infrared Camera (landing)
Remote Human Monitored
Max Speed
50 mph
Battery Pack
Custom 18650 based pack
Communication
4G onboard Data Connection
Energy Use Cost
$0.03 per mile
I keep reading about the greatest find of the century. White gold aka O B L.
It will take over all fuel needs. What do you know about it.
Thanks, Dante Gallinetti
Just found this old teaser tracker while looking for more information on Workhorse (WKHS) after the recent safety approvals and a big jump in stock price.
@Travis What is your opinion now about this company? How do they look in the EV market amongst NKLA, NIO, TSLA & BYD.
Wish I bought it at $3. LOL