Fisker: EV Maker Finding Its Niche

I am neutral on Fisker (FSR), as its strong growth potential is offset by the fact that it is at least several years away from profitability.

Fisker is a U.S. EV manufacturing company founded by Henrik Fisker and Geeta Gupta-Fisker.

The company produced the Fisker Karma, a luxury electric sports sedan, and is currently making Fisker Ocean, a sustainable all-electric car made from vegan and recycled material. (See Fisker stock charts on TipRanks)

Strengths

In June, Fisker signed a manufacturing agreement with Magna International (MGA), which will be making the Fisker Ocean.

The electric sports car remains on track for its debut in Los Angeles in November 2021 and will start full-scale production in November 2022.

Almost 17,500 people have already reserved the Ocean for a $250 fee, signifying that the company has significant customer interest, even though it has yet to sell an EV.

Recent Results

Fisker announced operating results for the second quarter of 2021 consistent with the company’s expectations, and reported a cash balance of $962 million as of June 30. Currently, the company is not making any profits, and its net loss rose to $46.2 million ($0.16 loss per share) for the quarter.

Fisker also announced an arrangement with Taiwanese manufacturer Foxconn to help it design and produce two vehicles by 2025, one of which is Project PEAR (Personal Electric Automotive Revolution), which is intended to be a more affordable alternative to the Ocean. Altogether, Fisker is on track to create a total of four vehicles by 2025.

Fisker has also formed partnerships with two EV charging infrastructure companies, the U.S.-based Electrify America and the Europe-based Allego.

There are several obstacles between now and the November 2022 unveiling of the Ocean. Fisker has yet to demonstrate it can deliver on this asset-light model, and any road bumps can adversely affect the company’s ability to deliver its EV models on time.

However, consumer interest is very much there for the Ocean. Assuming that the company is able to successfully market and deliver the model, and afterward maintain its production to meet demand, near-term profitability is not out of the question.

Valuation Metrics

Fisker stock looks quite expensive given that it is still quite a ways away from delivering a profit to shareholders. On a trailing 12-month basis, shares currently trade at a whopping 1,556x revenues, though this number should fall substantially once it starts selling vehicles.

Still, with the company expected to run an EBITDA loss of $270.4 million in 2021, and over $336.3 million in 2022, the company is highly speculative.

Wall Street’s Take

From Wall Street analysts, Fisker earns a Moderate Buy analyst consensus based on four Buy ratings, two Hold ratings, and zero Sell ratings assigned in the past three months. Additionally, the average Fisker price target of $20.33 puts the upside potential at 37.4%.

Bottom Line

Fisker enjoys significant customer interest in its products, and has secured high-profile production partnerships in Magna International and Foxconn.

Furthermore, its sector is rapidly growing, and Fisker has prudently been targeting a niche within the space in order to help it weather fierce competition from much bigger companies. Last, but not least, Wall Street is mostly bullish on the stock at current prices.

That said, the company is very speculative given that it is running up steep losses and is at least several years away from generating any profits.

Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.

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