Is Fisker Stock a Case of Putting the Cart Before the Horse?

Fisker (NYSE:FSR) chief executive officer Henrik Fisker tweeted on Dec. 9 that he’s begun designing the electric vehicle maker’s second product. While it’s always exciting to see new concept vehicles in the pipeline, the fact that Fisker’s more than a year away from delivering the Fisker Ocean SUV, owners of Fisker stock ought to be worried.

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

Is Fisker putting the cart before the horse? I look at both sides of the argument.

Fisker’s Biting Off More Than It Can Chew

To understand the timeline for electric vehicle production, from concept to delivery, one only needs to look at Tesla (NASDAQ:TSLA) to figure out if Fisker’s biting off more than it can chew.

Word of the new Tesla Model S first surfaced in 2008. It hired Franz von Holzhausen as its chief designer. Holzhausen previously worked for Mazda as director of design for North America. The prototype debuted in March 2009 at a rocket factory in Southern California. The first Model S was delivered to tech entrepreneur Jason Calacanis in 2012.

Ok, that’s a development timeline of at least four years, although Elon Musk got involved with Tesla in 2004 when he invested $30 million and became chairman. In October 2008, Musk became CEO.

So, it’s safe to say that four years is a good measuring stick for product development. The Model S began to take form in 2008, the same time the company’s first model, the Tesla Roadster, hit the streets.

The fact that Fisker is designing a second vehicle before a first one has even been delivered is ballsy, bordering on irresponsibility.

It’s Not So Crazy

If Fisker were a traditional automotive startup, I would say that designing a second vehicle before it’s even produced a prototype for the first is financial suicide. But that’s not the case.

Having learned a thing or two from his previous failure, Henrik Fisker is focusing on design and marketing, leaving the capital-intensive production to the giant auto supplier, Magna International (NYSE:MGA).

“As a glass-half-full kind of person, I like to think that Henrik Fisker learned a thing or two from his first foray into automotive manufacturing — Fisker Automotive went bankrupt in 2013 — enough to understand that it might be better to leave the actual building of cars and trucks to people like Magna while focusing on the design and marketing in-house,” I wrote in November.

Now, if I were Henrik’s boss, and he was the designer, and he’d already designed the Fisker Ocean and was waiting for the go-ahead to build the prototype — and he had no real responsibilities regarding the actual production — I would probably want him earning his salary by creating a second and third design for when we make it big.

Remember, it has said it has four vehicles in mind for production by 2025. That’s a lot of preparation work to get them from concept to design to prototype to production.

So it’s absolutely the right thing to be doing at this moment.

The Bottom Line on Fisker Stock

In my November article, I characterized Fisker stock as a long-term winner — with a catch.

“If you’re a risk-averse investor, I wouldn’t consider Fisker until trading in the low teens or high single digits. Even then, it might be more risk than you’re realistically capable of withstanding,” I wrote on Nov. 16.

“As for speculative investors, once it hits $20, I’m not sure there are any catalysts in the near-term to drive it higher. I’d wait for a better entry point.

“That said, long-term, I think Fisker’s a winner.”

At the time, FSR stock was trading around $17. It jumped to an all-time high of $23.62 at the end of November, only to fall back to below $15 as I write this.

If you’re a speculative investor, now is an excellent time to buy some shares. You can always buy more if it continues to drift toward single digits. If you’re a risk-averse investor, I still wouldn’t bite.

Has it put the cart before the horse? Absolutely not.

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

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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