Fisker stock should not be overlooked by investors interested in electric vehicles

  • Fisker’s valuation is significantly lower than other electric car manufacturers.
  • This may be because the company aims lower – but this plan also offers a higher chance of success.
  • A wide range of implications remains, but the FSR move should interest EV proponents.

Currently, Fisker (NYSE: ) has a market capitalization of about $2.4 billion. Tesla (NASDAQ: ), although it has been on a steep decline lately, is valued at about 220 times its value.

Obviously, Tesla, unlike Fisker, already has cars in production. In fact, the EV leader has quite a lineup, and most importantly, it’s expected to generate about $13 billion in net profit this year.

But Tesla is not the only company receiving increased credit from the market. Startups Rivian Automotive (NASDAQ: ) and Lucid Group (NASDAQ: ) have significantly higher market valuations (about 11x and 7x, respectively). Polestar Automotive Holding (NASDAQ: ) is, of course, further ahead in production, but its $16 billion valuation is lower than Fisker’s.

There are reasons for this discrepancy, it is true. Still, the size of that gap makes Fisker stock interesting, especially as the company’s first model enters production.

Why is Fisker’s price so low?

Still, there are reasons why peers deserve such great rewards from the market. One of them might be that Fisker doesn’t have a distinct advantage that others have.

Tesla is, well, Tesla: the first leader and space giant. Rivian is backed by an investment from Ford (NYSE: ) and a major deal with Amazon (NASDAQ: ) and plans to target profitable categories in consumer and commercial vehicles.

the Lucid’s top-of-the-line Air looks like a potentially great car; it already happened selected car of the year by MotorTrend For 2022. Polestar, somewhat humbled, has created a solid place for itself and has just lifted. a significant amount of capital.

In contrast, Fisker’s story seems a little less compelling. The company’s first model, the Ocean mid-size sports car, will be sold at a modest price, at least. Its second model, PEAR, is expected to have a base price below $30,000. (Apparently, a high-end sports car is planned at some point).

Fisker is giving Oceania to a subsidiary of Magna International (NYSE: ) while its competitors are building production capacity. As with pricing and go-to-market strategies, Fisker is playing it safe.

This is perhaps not surprising given that two of founder Henrik Fisker’s former companies went bankrupt. But in an industry where investors are by definition willing to take risks, Fisker Inc. finds himself in a somewhat strange situation. Premiums are higher elsewhere.

Risks of FSR share

And Fisker isn’t like zero risk; automotive manufacturing is a very tough industry and competition remains fierce. It is entirely possible that Fisker’s plans, although less ambitious than other players in the electric vehicle sector, will not materialize.

Indeed, even with outside production, financing remains a question mark. In the third quarter, Fisker sold $132.5 million worth of stock under a so-called “on-the-market” arrangement, where its agents routinely sell stock on the open market. Fisker ended the quarter with $825 million in cash — but not enough to make the company profitable. More sales will follow, which means more stock cuts, even in the best of times.

Although Fisker has adopted a less risky strategy, Fisker stock remains very risky.

Case for Fisker Stock

That is, the reduction of the assessment is important. Even given the increase in the stock count, Fisker doesn’t need to be a massive gainer for the stock to be interesting these days. To compensate for the risk involved, Rivian and even Lucid investors must see fairly large odds of continued success and multibillion-dollar annual profits.

Fisker shareholders can win with a consistently profitable business, even if it’s a bit specialized. And it looks like the company is well on its way to achieving that goal.

Production began this month, as promised when the company announced plans to go public more than two years ago. Ocean has been well received so far. For example, TheDrive gave it a score of 8.5 out of 10. the selection of “weird in a good way”.

Bookings continue to grow, from around 5,500 in summer 2020 to over 62,000 now. Over time, Fisker will bring its production in-house; is already looking for an American site to allow its buyers of take advantage of tax benefits.

For the most part, Fisker did what it said it would. The company, which announced a merger with special-purpose procurement company Spartan Energy two years ago, was aiming to produce 51,000 vehicles this year; the current forecast is just over 42,000. By the standards of SPAC mergers, and especially SPAC EV mergers, that’s a win.

The Ocean looks like a great car. There is probably a place where the company can reach the middle of the market instead of climbing to the top like Lucid and Rivian. The story here makes sense and there is a good chance the story will work.

With a market cap of $2.4 billion, that’s enough to see some upside. FSR certainly won’t be the “work-at-home” investment shareholders that other EV manufacturers are looking for, but there’s nothing wrong with single and double production either.

Disclosure: As of this writing, Vince Martin is short TSLA.

Leave a Reply

Your email address will not be published. Required fields are marked *