Fisker Is Off to a Sluggish Start, But Can Still Win the Race

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Fisker (NYSE:FSR) is one of the more intriguing electric vehicle entrants that began publicly trading in 2020. After a spike of, perhaps irrational, exuberance after Fisker stock began trading as a public company, the company’s stock has come down to earth. And in a year when many newly public stocks have posted meteoric, and likely unsustainable, gains, this may be the best thing for speculative investors.

The Fisker logo hangs on display at the November 2011 International Auto Show.
Source: Eric Broder Van Dyke / Shutterstock.com

Fisker is doubling down on the benefits of electrification. The company is not only building an electric vehicle. It’s building an EV, in part, with sustainable materials. But altruism aside, the EV field is getting crowded. And companies like Tesla (NASDAQ:TSLA) and Nio (NYSE:NIO) are starting to deliver products at increasing numbers.

And that means that no matter how eco-friendly, no matter how well priced the Ocean may be, it’s likely to be launching at a time when other EV’s will also be launching. Will the company’s design be enough to help the company generate revenue, much less profit?

It’s Going to Be a Long Haul

By the company’s own admission, its flagship electric SUV, the Ocean, won’t start rolling off assembly lines until 2022 at the earliest. And with an agreement, although not a definitive one, with Magna the company appears to be ready to move the Ocean from concept to reality.

On the one hand I appreciate the fact that the company, it appears, is being realistic about its business plan. But the electric vehicle market is getting very crowded.

Fisker stock jumped briefly recently when the company announced it had received 10,000 pre-orders for the Ocean. This is encouraging, but as I’ve mentioned before the pre-orders are not binding. In fact, by at least one account I’ve read they are 90% refundable.

With a pre-revenue company, investors need something to believe in. And 10,000 pre-orders are a good start. But investors need to know that at least a portion of this revenue may never be realized.

My Bullish Case For Fisker Stock

Despite what I just wrote, I do believe that Fisker may have a realistic path. To begin with, I have a preference for companies that have a unique selling proposition (USP). I’m not sure that Fisker’s pledge to build their electric vehicles with, in part, sustainable materials qualifies as a USP, but it’s certainly something that the company is making sustainability a key marketing message.

In absence of a USP, I like to see companies that are leaning into an area where the market is. And I believe that Fisker is doing this because it’s choosing to bring an SUV to market. Americans may be shifting to electric vehicles. However they may not be shifting to smaller vehicles, at least not as their primary means of transportation.

And I also like the company’s decision to outsource the manufacturing of the Ocean (and presumably other vehicles to follow) to a third party. In this case, the company has formed a partnership with the Canadian auto-parts maker Magna International (NYSE:MGA). I do have concerns that leaving the manufacturing to a third party may dilute some of Fisker’s USP in the name of efficiency. But it leaves the company free to focus on the overall vision.

Slow And Steady May Win the Race

It’s refreshing to see the skepticism surrounding Fisker stock reflected in the stock’s current price. 2020 has been a year when many EV stocks have gone public even though revenue is years away. And Fisker is no different.

Like all the EV entrants to the field, Fisker has a lot to prove. And investors expecting to see revenue will be waiting awhile. But with a speculative stock, maybe the best you can hope for is slow, steady growth. It’s not as exciting, but maybe in 2021, investors will be willing to settle for a little more predictable.

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

Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.


Article printed from InvestorPlace Media, https://investorplace.com/2020/12/fisker-stock-slow-start-may-still-win-race/.

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