Like its peers in the electric vehicle (EV) space, Fisker (NYSE:FSR) has done well so far this month. Thanks the “Biden boost,” speculators in FSR stock have more reason to keep the “EV bubble” going.
But, as exuberance for this sector remains sky-high, jumping into this name today may not be the best move.
Yes, there’s big potential with the company’s flagship Fisker Ocean SUV. But, success for this company remains years away. In the meantime, things could get better (or worse) for the upstart.
Sure, that’s the case with many EV companies. Especially the ones that went public this year via SPAC (blank-check company) mergers.
For example, based on multiple factors, Lordstown Motors (NASDAQ:RIDE) appears to be a winner right out of the gate. But, only time will tell whether it becomes for electric pickups what Tesla (NASDAQ:TSLA) became for electric luxury sedans.
The main concern here with Fisker is competition. Not only from Tesla, but legacy automakers aggressively moving into EVs as well. The possible result is that, far from hitting its aggressive revenue projections, this company (the second incarnation of this brand) fails, just like its predecessor.
So, does that mean shares are headed lower? Not exactly. There may be additional runway left for EV stocks, given the continued strong enthusiasm. But, with the stock moving higher only due to the EV bubble, why not buy a more formidable contender?
Simply put, skip out on this name, and go with the more solid EV “story stocks” instead.
Why It’s Tough to Handicap FSR Stock
Right now, it doesn’t take much for an EV startup to impress investors. Most publicly-traded names in this sector have been on fire so far in 2020. And, for the privately-held ones? There are scores of SPACs willing to take you public.
Given this enviornment, it’s hard to tell which ones are future industry leaders, and which ones are not ready for prime time (and never will be). In the case of Fisker, it seems to fall somewhere in between.
On one hand, you can make the case that, despite its predecessor’s failure, this current incarnation can not only survive, but thrive.
As InvestorPlace Markets Analyst Thomas Yeung discussed Nov 17, the “new” Fisker isn’t going to make the same mistakes as the “old” one. Outsourcing production, and focusing on a product (SUVs) that appeals to a wider market (mass affluent, versus the super rich), it may succeed the second time around.
On the other hand, a better game plan alone doesn’t guarantee success. As I discussed Nov 9, competition may be what takes down this version of Fisker. Not only does it have to compete with Tesla for a piece of the EV market. Legacy automakers like Ford (NYSE:F) and GM (NYSE:GM) are moving more aggressively into the space as well.
Sure, perhaps the Fisker Ocean will be competing more with European SUV models, as opposed to Detroit’s EV offerings. But, names like Volkswagen (OTCMKTS:VWAGY) have moved into EV SUVs in a big way as well.
Yet, Shares Could Continue to Climb
Going by fundamentals, it’s questionable whether the “new” Fisker will survive, much less reach its ambitious revenue goal of $13 billion by 2025. Yet, this risk may not sink shares in the near-term.
Even with the noticeable breather EV stocks took on Nov 24, the party may not be over just yet for the sector. As investors continue to “buy on the rumor, buy more on the news,” it’s hard to predict when the “EV bubble” will finally pop.
Obviously, the main takeaway is that, as EV mania continues, it’s too risky to short names like FSR stock. But, another takeaway is that this stock is only moving higher because of the EV bubble, not due to any improvement in its fundamentals.
In other words, why buy this name, with all its uncertainties? Other names, like Lordstown, are also benefiting from the uncertainty. But, unlike this company, that company may have a much clearer road to success.
Sit This EV Name Out
All bets are off whether Fisker can live up to its ambitious growth goals. Sure, you can say the current incarnation of this brand has a better shot at success. Yet, with heavy competition in the EV SUV space, there’s a good chance it winds up an “also-ran,” falling short of expectations.
However, this likely won’t hurt the stock, as the EV bubble continues. Yet, why buy this highly-uncertain electric vehicle play, when there are more certain opportunities out there, also benefiting from the continued euphoria for this sector? Bottom line: sit out on FSR stock, and consider the more solid EV plays out there.
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, a contributor to InvestorPlace, has written single stock analysis since 2016.