I’m still there this week. I see Groupe Workhorse (NASDAQ: WKHS), Le SAF de Chico (NYSE: CHS), and Tesla Motors (NASDAQ: TSLA) as vulnerable short-term investments. Here’s why I think these are three actions to avoid this week.
Investors and speculators are seeing a load on EV stocks, and during a wild moment in mid-June, it was time for Workhorse Group to shine. The electric utility vehicle maker saw its inventory roughly quadruple in the second half of June, following a pair of bullish Wall Street notes.
One of the optimistic updates from analysts was from BTIG’s Gregory Lewis, doubling his price target to $ 10. However, by early July, the stock had risen from less than $ 5 in mid-June to over $ 20. Lewis would raise his price target again, but at this point he’s only chasing the hot title.
Workhorse has some advantages for early engines when it comes to electric delivery trucks, but that market is about to get pretty crowded. Workhorse generated a loss of $ 133 million in its most recent quarter on sales of just $ 92,000. It is not a typo. The future may be bright for Workhorse Group in what is clearly an exhilarating upward niche, but expectations are already too high for a small company with a market cap of nearly $ 1.7 billion.
Le SAF de Chico
I’m no fan of kicking a business when it’s down, but among the dozens of businesses reporting new financial data this week, Chico’s FAS appears to be one of the most vulnerable. The retailer behind the Black Market concepts of the White House, Soma and the eponymous mall is in trouble.
Clothing has been among the commodity industries hardest hit by the pandemic, and it’s no surprise, with little reason to dress with new duds these days. Many retailers will not survive the crisis, and the bad news for Chico’s FAS is that it was lagging behind even when the economy was doing well. This will be the sixth consecutive fiscal year that sales have declined for Chico’s FAS.
There is little reason to expect anything positive in its second quarter budget report on Wednesday morning. This has reduced costs, but it will not be enough. Chico FAS began a gradual reopening of its stores in early May, but if customers weren’t shopping there before, why will they start shopping now? Chico’s FAS should not have rejected the takeover offer it received last summer. This would have saved its shareholders a lot of harm.
The only title I was wrong about last week was Telsa Motors. I thought the peak the week before after saying a stock split would die, but I was wrong. The ambitious electric car maker climbed 24% and enters this new trading week as the tenth most valuable US listed company by market capitalization.
Tesla, the company is doing great things, but I don’t think there are just nine publicly traded companies that are more valuable. The stock split won’t go into effect until the end of the month, but it’s a zero-sum game for a stock that has increased eightfold in the past year despite only increasing 3% in end income. Tesla deserves a market premium for many reasons, but these recent gains have yet to be earned.
If you’re looking for safe stocks, you probably won’t find them in Workhorse Group, Chico’s FAS, or Tesla Motors this week.