With EV special purpose acquisition company stocks selling off since September, it’s no shock Spartan Energy (NYSE:SPAQ) stock has headed lower. SPAQ stock soared last summer on news of the acquisition of EV startup Fisker. But, Fisker has a long way to go before it’s the next Tesla (NASDAQ:TSLA).
In the meantime, the company is a work in progress, as it brings its flagship Ocean SUV to market. Not only that, it has its work cut out for it building up the Fisker brand. As InvestorPlace’s Josh Enomoto wrote Oct. 22, the name has appeal with automotive enthusiasts. Yet, it’s far from being top of mind among the general public.
With these challenges, it makes sense why investors are no longer madly in love with Spartan stock. Shares have fallen from a high of $21.60 per share, to around $10 per share.
Could shares dip down into the single digits? With EV SPACs trending lower, it seems likely. However, for those who haven’t jumped in yet, that’s good news. At much lower price levels, potential returns may be well worth the high risk.
SPAQ Stock, and Fisker’s Odds of EV Success
As first-movers and legacy automakers enter the space, will there be room for EV names not yet ready for prime time? That’s the key question for development-stage electric automakers like Fisker. Sure, with its partnership with auto parts giant Magna (NYSE:MGA), it has secured the infrastructure needed to deliver its first run of Ocean SUVs on schedule (fourth quarter of 2022).
Given that Magna’s contract manufacturing platform gives Fisker the scale to sell its first vehicles at a reasonable sticker price (around $40,000), the company has a shot at both competing on price, and being economically viable.
On the other hand, the competition could accelerate between now and when it makes its first vehicle deliveries. Besides competing with Tesla’s Model Y SUV, legacy automaker Ford (NYSE:F), with its Mustang Mach-E, is throwing its hat in the ring. General Motors (NYSE:GM) is launching an EUV, or electric utility vehicle, version of its Chevrolet Bolt model, as well.
With much lower name recognition, the upstart may have even greater pressure to sell on price. Sure, the Ocean has a lower MSRP than “Detroit Three” (legacy automaker) models like the Mach-E (starting price $42,895). But, given Ford has already slashed prices, it seems inevitable it would cut them again as new entrants enter the market.
Fisker estimates it can generate annual sales of $10.6 billion by 2024. Not only that, but an estimated $2 billion in pre-tax profit that year as well. Yet, with the heavy competition from deeper-pocketed rivals, there’s no guarantee it’ll come close to hitting these numbers.
What Lies Ahead for EV SPAC Stocks
Are EV stocks topping out, or just taking a breather? Again, like the odds of Fisker’s potential success, it’s tough to handicap. Tesla shares have tread water since late summer. But, names like Nio (NYSE:NIO) have continued to soar. Granted, given Nio’s a pure play on Chinese EV growth, much of its latest rally is due that market’s rapid EV industry recovery post-novel coronavirus. Yet, things have been much worse for the “also ran” EV SPAC stocks.
SPAQ stock has tumbled significantly in recent weeks. Other EV SPAC plays, like Nikola (NASDAQ:NKLA), are down massively during the same period.
Nevertheless, after these heavy near-term losses, could we see a rebound in hard-hit EV SPAC stocks? It’s possible. As I discussed in a recent article about Workhorse (NASDAQ:WKHS), the results o the Nov. 3 U.S. presidential election could help fuel another rally across-the-board for the space.
Yet, even an electoral result in this sector’s favor may not be enough to boost SPAQ stock. Potential changes to EV policy in Washington may benefit the legacy automakers and Tesla more than upstarts like Fisker. Simply put, don’t rush out and buy this ahead of voters heading to the polls.
In short, it’s tough to make a call on where “also-ran” EV stocks are headed in the near-term. With this uncertainty, it may be best to wait things out for now.
Wait for Spartan to Fall to Single-Digits
At today’s prices, this EV SPAC is trading near its IPO price of $10 per share. But, with investors either cashing out, or getting doubtful over the prospects of its pending Fisker acquisition, there’s a chance shares continue to dip, and fall into the single-digits.
While that’s bad news for those who bought near its highs, another move lower could mean a great opportunity to dive into SPAQ stock. At a much lower entry point, this speculative EV play’s potential long-term gains may be worth the risk.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, contributor to InvestorPlace, has written single stock analysis since 2016.
