It’s been a wild ride for Fisker (NYSE:FSR) since the electric-vehicle (EV) maker held its initial public offering (IPO) on Oct. 30 of this year. Should investors hold on and hope for less volatility moving forward or get out before the price of Fisker stock drops again?
Over the past month, FSR stock has experienced steep rises and dramatic falls. Since Nov. 25, Fisker’s stock price is up 7%. The up-and-down lines on a chart of the company’s share price resembles a heart monitor. The wrenching volatility reflects the fact that Fisker is an EV startup and largely a speculative investment at this point.
While Fisker is far from being an established automaker, the company currently has one electric vehicle that is at the stage of taking pre-orders. The “Ocean” electric sport utility vehicle (SUV) will reportedly debut at the Los Angeles automotive show in May 2021, with deliveries to customers expected in late 2022. That’s still a ways off, but it appears to be enough to attract investors who are on the hunt for the next Tesla (NASDAQ:TSLA) and hoping for big gains.
A Volatile Sector for Fisker Stock
FSR stock isn’t alone in terms of its volatility. Most EV manufacturers have stock prices that jump around a lot. Nio (NYSE:NIO), Nikola (NASDAQ:NKLA), Electrameccanica Vehicles (NASDAQ:SOLO) and others have seen sharp spikes in their share prices and equally steep declines. Even Tesla’s stock has been rocky since the company split its stock at the end of August. This is because the EV sector is still in its infancy and being developed at a rapid pace.
Many EV makers have not built a single car, truck or SUV. And the electric charging stations and other infrastructure needed for society to move away from gasoline-powered vehicles has yet to be built out. The entire industry is still in the very early stages of development. But with sales of electric vehicles forecast to swell from four million in 2018 to 120 million by 2030, investors are keen to get exposure to the growing sector, despite the risks.
Smart Business Moves
For the time being, Fisker has all of its eggs in the Ocean SUV basket. The company’s first production vehicle is expected to retail for under $40,000, making it competitive with pricing for other electric vehicles on the market today.
The specifications on the Ocean show it will be powered by electric motors supplied by an 80kWh lithium-ion battery and have a driving range of up to 300 miles on a single battery charge. At this point, the best thing that can be said of the Ocean electric SUV is that it has potential.
Fisker has also made some sensible business decisions. The company has a deal in place with Canadian auto-parts supplier Magna International (NYSE:MGA) to manufacture the Ocean SUV at Magna’s European facilities. This plan to outsource production will ultimately save Fisker money and allow the company to focus on marketing and sales.
Potential For FSR Stock
The incoming administration of President-elect Joe Biden should be friendly to Fisker and other EV manufacturers. Biden plans to spend almost $2 trillion on “green energy” investments. The plan includes funds to build nationwide charging infrastructure and generous tax credits for EV purchases throughout the U.S.
The future remains unknown, and which companies ultimately emerge as winners in the electric-vehicle space remains to be seen. And Fisker has only been a publicly traded company for a little more than one month now. However, despite the uncertainty, FSR stock still looks like one of the better electric-vehicle bets right now. Fisker stock is worth the risk. Just don’t fall in love with the company and its stock just yet.
On the date of publication, Joel Baglole held long positions in TSLA and NIO.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.