Fisker Stock Makes Sense in an EV Investing Landscape That Often Doesn’t

This post was originally published on this site

Investors looking to establish a position in Fisker (NYSE:FSR) stock likely come in two flavors. There are those looking to capitalize on short-term gains in FSR stock while the shares could be appealing for long-term buy-and-hold investors. 

Source: Eric Broder Van Dyke / Shutterstock.com

For the latter, there’s a chance that current dynamics could soon make establishing a long-term position cheaper. 

Let’s talk first about that buy-the-dip opportunity. Then let’s look at the factors that do, or do not make Fisker an attractive buy-and-hold target. 

FSR Stock as EV Bubble Play

If we follow the recent price movement of electric vehicle leaders Tesla (NASDAQ:TSLA) and Nio (NYSE:NIO), there is reason to be both fearful and hopeful.

Tesla has fallen 28%, from $820 to $620 in the last six or seven weeks. Nio, meanwhile, has declined 42.5% in a similar time frame. Markets then have some inherent degree of fear and trepidation around both stocks, and EVs generally.

Is this the beginning of the long rumored EV bubble pop? Maybe or maybe not.

The other side of that coin flip is that now is a great time to stock up, hold, and wait for price gains to materialize. FSR stock has been roughly halved during this period. Actually though, there’s reason to believe it could drop further, any day.

Beware r/WallStreetBets

Subreddit r/WallStreetBets is interested in Fisker. In the last 24 hours FSR is the 27th trendiest stock. The interest likely stems from Fisker’s 16.85% of float sold short. Broader market sentiment is more important than subreddits, but they do have some sway.

The overall point here is that there are multiple catalysts suggesting that current low prices look like an ideal place to jump into Fisker. Investors should understand that choosing to do so means investing in EV products with a longer time to production. Further, The cars won’t be produced in-house

Outsourced Strategy

Fisker’s Ocean EV will be manufactured by Magna (NYSE:MGA) rather than in-house. The benefits of using an outsourcing strategy should be obvious. Magna is an experienced manufacturer having produced more than 3.7 million vehicles across 30 models during its existence.

Fisker is handling design of the Ocean, and some of the components will be off the shelf from Magna’s suppliers. Of course, Magna will handle assembly. Oceans will begin rolling off of Magna’s assembly lines sometime in Q4 2022. 

Right now, investors only know the Fisker Ocean within the company’s EV lineup. There is however, a second vehicle coming. 

Fisker signed a memorandum of understanding (MOU) with Taiwan’s Foxconn to assemble its second EV. Interested parties have little information outside of the business announcement. Foxconn will produce 250,000 Fisker vehicles per year, and aims to begin production in Q4 2023. Foxconn has an assembly plant in Wisconsin. Thus, it looks likely that Fisker’s second EV will be American made. 

Fisker won’t begin vehicle production until late 2022. So it should be noted that its latest reservation tally stands at 14,000 vehicles. That figure is up from 12,467 when Fisker last reported in late February.

Debt Free, but Losing Money

Investors can certainly find positives in Fisker. In its fiscal year 2020 earnings report the company noted that it is targeting fleet programs in Europe for reservations. It anticipated that it would be able to make meaningful headway and growth in 2021. It has done that with its Credit Agricole agreement.

Although the number of vehicles agreed upon wasn’t stated, it looks like it may have been 1,523. Fisker didn’t report any other reservations between Feb. 25 when it reported 12,467, and the recent agreement which brings it to 14,000. So I’m assuming that accounts for the difference. 

The company is losing money as one might expect. But it doesn’t have any debt (as of Dec. 31, 2020). 

All in all, Fisker doesn’t look bad. Its asset-light model makes it less risky and capital intensive. I also get the feeling that initial Fisker EVs will suffer fewer quality issues due to the manufacturing model.

I think now is as good a time to establish a position in Fisker as investors are likely to get. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

Related Posts