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Can Workhorse Become an Electric Car Market Hero by Purchasing GM’s Plant?

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Workhorse GM

On Wednesday morning, President Trump tweeted that General Motors (NYSE:GM) is negotiating with Workhorse Group Inc. (NASDAQ: WKHS) to sell its closed down Lordstown plant that resulted in 4,500 lost jobs.  This tweet spurred so much interest in Workhorse that its website crashed.

GM soon confirmed the news, saying that the move has the potential to bring significant electric vehicle production and hundreds of jobs to the massive factory that measures over 6 million square feet and sits on 900 acres. By the end of this trading Wednesday, Workhorse shares had surged more than 200 percent with a closing price at $2.65. Sounds like a win-win news deal for all, but there’s a lot more to this story, setbacks included.

What we know about Workhorse Group Inc?

Workhorse is an Ohio-based battery-electric transportation technology company which was originally founded in 1998 as a commercial van manufacturer. With 98 full-time employees, Workhorse designs, manufactures, builds, sells, and leases battery-electric vehicles and aircraft in the United States.

The company is struggling to bring an all-electric pickup truck to market and it has never been profitable since it was founded. Workhorse is especially burdened with financial setbacks during the last few years, which can complicate the purchase of a massive facility like the Lordstown plant.

The company reported a $36.5 million loss last year, which is slightly less than 2017’s loss of $41,216,788 .But more importantly, its annual sales dropped from $10,038,460 in 2017 to just $763,000 across all of 2018. It had just $1.5 million in cash at the end of 2018. It is no wonder since the company’s obligations came due as its interest expense was $2,434,749, compared to $180,437 in 2017. Furthermore, the company’s long term debt has increased from $1,709,881 (2017) to $8,312,079 in 2018. Workhorse really needs to pull of one heck of an innovation so it doesn’t drown in debt.

This increase in debt is further emphasized due to the company signing a deal at the beginning of 2019 with Marathon Asset Management, a hedge fund known for investing in distressed companies. Marathon pledged up to $35 million in financing, with Workhorse using all of its assets, including crucial patents that keep the company going to this day, as collateral. Workhorse had to use some of that money to pay off previous loans that were already coming due, and admitted in a recent financial filing that it would likely only cover the company’s costs through the second quarter of this year. As another consequence, this also delayed its all-electric pickup truck W-15 whose design was unveiled in 2017.

As for the Q1 results, the company reported just $364,000 in revenue, down from $560,000 in the same period last year. As of March 30, 2019, the company had cash, cash equivalents and short-term investments of $2.8 million.

So clearly, there’s the matter of money although it remains unclear how much GM wants for the Lordstown plant and how Workhorse will find the funds to pay for it. There are some hints that a new entity would be formed by Workhorse founder, Steve Burns, to acquire the facility, with Workhorse holding only minority interest. This means that Workhorse could seek new equity without diluting existing shareholder value.

The company does have pending contracts. UPS announced their collaboration in February to deploy 50 plug-in electric delivery trucks. There is also a partnership with trucking company Ryder and Workhorse is also one of the four remaining companies competing to be the maker of the United States Postal Service’s next-generation mail trucks.

The market view

Electric vehicles, solar energy, pickup truck and pickup truck bed covers are all growing markets whose growth is expected to only further accelerate over the coming years. The International Energy Agency (IEA) states that electric vehicles will grow from 3 million to as much as 125-220 million by 2030. Bloomberg New Energy Finance has projected the rise of electric cars, saying that the point of liftoff for sales will be that by 2022, electric vehicles will cost the same as their combustion counterparts.

With companies like Workhorse, Tesla and Volkswagen developing electric pickup trucks along with more automotive companies around the globe starting the same,  this is especially good news for Franchise Holdings International (OTCMKTS: FNHI).

It is the Holding company of Worksport Limited, an innovative automotive tech company that reinvented truck bed covers with solar technology. By combining solar technology with the normal generally known tonneau cover, Worksport was able to develop a solar power generating truck bed cover to have power on demand available for both work and sport outdoor activity. This innovation also promises to extend the driving range of the fast growing global market of electric pickup trucks.

What better market forecast than a company that is growing with large revenues, profits and operations in not only one, but all four growing sectors!

What’s in store for Workhorse?

Can Workhorse continue to operate with its financial history and such heavy debt, not to mention afford to purchase Lordstown plant? Well, we need to wait for the details of the deal and keep an eye on further announcements of this troubled EV startup whose innovative technologies could preserve a more 50-year tradition of vehicle assembly work.

Talks have at least progressed enough to now involve other people so the deal is promising enough to involve the United Autoworkers Union. The UAW’s position, however, is also to be seen. A GM spokesperson indicated that Workhorse was willing to work with the UAW.

Global Renewable Energy investments are higher then ever before and the world likes sustainable and renewable energy investments, so let’s not forget there’s always room for surprises.

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Earnings

Toyota’s News: Redesigned Corolla, New Investments and Partnerships

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Toyota Stock Market News

Toyota Motor Corporation (NYSE: TM) is managing something other automakers only dream of. The company is honouring its values while achieving sustainable growth for over a decade. The dependable Japanese giant continues to deliver on its promises as it prepares for an electric future.

A new sturdy yet sporty Corolla

On September 17th, the company announced a completely redesigned Corolla that now goes beyond just being a practical buying decision. The newly evolved Corolla has a sporty design, offering pleasurable driving and advanced safety equipment. Being built on Toyota New Global Architecture (TNGA), Corolla is ready to evolve to meet customers’ needs, according to Yasushi Ueda, chief engineer in charge of development.

Since its debut in 1966, this car is nothing less than adored by consumers all over the world and now, it will have its first hybrid version available to U.S. customers.

Hybrid strategy is actually paying off

Just like Honda Motor Co. (NYSE:HMC) with its 2020 CR-V Hybrid, Toyota is using its hybrid technology to position itself for future growth and transition to an all-electric future, despite the fact these energy saving vehicles do not qualify for government subsidies. But, this strategy is paying off as hybrid demand skyrocketed and the company proudly revealed in February that Lexus reached its 10 millionth vehicle sales milestone since its launch, with its 2018 sales performance achieving several ‘best-ever records’. And it is thanks to these figures that the Chinese government is also starting to see the potential of such vehicles so things can only get even better for Toyota. As the saying goes, persistence is the key to success and these two companies have been quite brave in sticking to HEVs.

New Investment – $391 Million Goes to Texas’ San Antonio Plant

This will be Toyota’s first expansion in nine years at the plant that produces its Tundra and Tacoma pickup trucks. It is the part of the company’s strategy to invest $13 billion in its U.S. operations over the period of five years, ending in 2021.

Future Investment – $243.29 million to Produce New Vehicle in Sao Paulo

Toyota is also about to get an even stronger presence in Brazil as it will hire 300 new employees at the Sorocaba Plant to start the production of a new vehicle.

Partnership

And let’s not forget the ground-breaking partnership of Japan’s leading automakers that was revealed in August as Toyota and Suzuki Motor Co. (OTC: SZKMF) announced they will collaborate on developing autonomous car technology. This deal is cementing the bond that the two automakers kicked-off in 2016. They might seem like an odd couple as Suzuki is a everything but a big player, yet its strong presence in India is only one of the things that will greatly benefit Toyota. Although Suzuki admitted defeat on the world’s biggest playgrounds, China and the U.S., it cracked the code for emerging markets. And this is exactly where future global sales growth is expected to come from.

Inventing a car that will run forever?

According to Bloomberg, Toyota aims to go far further than electric by teaming up with Sharp Corporation (OTC:SHCAY) and Japanese governmental organization NEDO that encourages the development of innovative technologies. Considering that Toyota is a company that has even used the economic crisis and recession to only come out stronger, it’s not unlikely that it is set to out do the impossible by mixing the most efficient batteries with solar panels. The company’s strong financial performance and track record show that if anyone can do it, it’s Toyota Motor Co.

 

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Nike Exceeds Wall Street Expectations With Q1 Earnings for FY2020

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Direct-to-consumer sales and digital momentum strategies did the trick for Nike

When Nike (NYSE:NKE) released its better-than-expected first quarter of the fiscal 2020 results late Tuesday. Naturally shares jumped more than 5% to reach $91.80. The reported revenue increased 7.2% year comparing to last year, achieving $10.7 billion, greater than the expected $10.44 billion. Net income soared more than 28%, making adjusted earnings per share $0.86, also smashing expectations of $0.70 per share.

Nike managed to achieve a turnaround

The biggest contributor to total sales was Nike’s North American segment that increased 4% comparing to last year. But China sales also continue to grow and by double digit percentages: 22% to be exact, topping $1.68 billion. Overall, these are fantastic news for investors. Especially since the company’s rare earnings miss for the final quarter of the previous fiscal year. The company attributed this to increased marketing costs and a higher tax rate. But highly anticipated new product launches and solid results for continuing lines, along with efforts to draw new customers to the Nike SNKRS app, did their magic.

Digital momentum is key

Digital movement is transforming and amplifying everything Nike does and in Q1, Nike Digital grew 42% on a currency neutral basis. This growth is driven by enhanced digital services and the international expansion of its app ecosystem. Moreover, The Nike app and SNKRS app are now both live in over 20 countries, with more expansion coming throughout the year.

There are literally no weak spots for investors

Arguably, there are no weak spots for prudent investors to dig in as far as this quarter’s report is concerned. The company is literally firing on all cylinders. The company’s management attributes these results to “the depth and balance of the company’s complete offense, building on the strengths of its foundational business drivers and capitalizing on the untapped dimensions of its portfolio”. Management has also dismissed any concerns that US-China trade conflicts could harm its operations, disclosing no impact has been seen up to date.

Nike showed it can even handle the increased tariffs

Earlier this year Nike joined over 200 other footwear companies urging President Trump not to increase tariffs on footwear imported from China, calling the move “catastrophic for our consumers, our companies, and the American economy as a whole.” But while those tariffs are certainly catastrophic for small players, Nike seems more than capable of mitigating the consequences of this added expense.

Poor macroeconomic conditions are only masking Nike’s true power

The company made it clear that its figures would have been even stronger had it not been for macroeconomic challenges which are manifesting through tariffs and foreign-exchange rates. They implied that the weakening economic climate is essentially masking Nike’s true strength. And in addition to children, women are also a big opportunity for the company that Nike will continue exploiting. This is why Nike expects better-than-planned growth in its higher-margin NIKE Direct channels and international segments and consequently, its full-year gross margin. One thing is for sure: Nike has turned itself into so much more than a ‘sneaker-company’.

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Apple Will Be Making Its MacBook Pros in the US

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With a newly granted “federal product exclusion,” enabling it to import some Mac Pro parts without paying tariffs, Apple (NASDAQ: AAPL) will be able to save enough money to make US assembly worthwhile. The company announced on Monday that it will manufacture the new version of its Mac Pro desktop computer in Austin, Texas. It’s also a big political win for Apple, since President Trump has for years called on the company to make more products in the US. Tim Cook clearly made a compelling case during his meetings with President Trump. Apple described the decision to keep Mac Pro production in Austin as part of its “commitment to US economic growth.”

Macroeconomic climate is not favourable

The September figures around the world are simply awful. The uncertainty brought on by intensifying trade wars, the outlook for the car industry and Brexit are paralyzing investors, with September seeing some of the worst performance since the financial crisis in 2009, leading many to worry about whether yet another crisis is upon us. On a brighter note, Apple’s stock went up 0.2% after Bloomberg reported that ten of its 15 requests for an exemption from tariffs on imports from China had been approved.

New investments

Apple previously disclosed plans to spend $350 billion in the U.S. by 2023, a figure that includes new and existing investments. Its Apple TV+ is set to launch on November 1, with stars like Oprah Winfrey bringing her famed book club streaming show to the company’s subscription service. Among documentaries that will be released, there will even be a multi-series about mental health, featuring no other than Prince Harry himself. Apple’s subscription service will cost only $4.99 a month and will be available in 100 countries and regions at launch. Also, customers who buy a new Apple device will also get a free year of Apple TV+.

Competitors

Netflix (NASDAQ: NFLX) is still the leader when it comes to U.S. streaming, along with Amazon Prime (NASDAQ:AMZN), AT&T’s HBO (NYSE: T) and upcoming Disney+ (NYSE:DIS), it is certain that competition will be intense. Netflix’s stock has been dropping since July, which was the first time the number of subscribers fell. Moreover, Netflix’s stock price has now officially wiped out any gains it’s made over the year so far and both Disney and Apple have a shot at beating Netflix at its own game.

Apple is still facing impending import duties and innovation difficulties

Let’s not forget that the company still faces import duties scheduled for Dec. 15 that could affect nearly all of its major products including iPhones, iPads, MacBooks and Apple Watches. And more importantly, it is thought by many as facing an innovation problem so it heavily relies on customer loyalty that will continue driving its sales. We’ll just have to wait for November 1st launch of Apple TV+ to see the impact of Apple’s new streaming subscription service.

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