Why Fisker Continues to Look Significantly Undervalued

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Fisker (NYSE:FSR), the upstart electric vehicle maker (with its Ocean SUV due to begin production at the end of 2021 and delivered in 2022), continues to look significantly undervalued. As a result, FSR stock is likely to double over the next two years, I believe.

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

I wrote about this valuation last month in my article, “Fisker Stock Is Set to Double Over the Next Year or So.” Since then, FSR stock declined 2% from $14.92 on Dec. 31 to $14.62 as of Jan. 25. That is nothing. This means the stock is still on track to double, especially once the market realizes its underlying value.

Fisker’s Driver Assistance Product

Since then, Fisker reported that its partnership with Magna International (NYSE:MGA) to make its Ocean SUV also includes an intelligent pilot solution. The two companies are developing software packages powered by a scalable domain controller architecture.

Of course, this is a long way away from the type of self-driving software and solutions already available in EVs from companies like Tesla (NASDAQ:TSLA). Here is what Fisker says its Fisker Intelligent Pilot product will include:

  • Multi-function autonomous systems supporting Fisker-unique feature sets.
  • Over-the-air updates powered by the Fisker AI cloud and able to deliver incremental new advanced product features through the lifecycle of the vehicle.
  • Advanced industry-leading sensor set, including digital imaging radar and high-resolution cameras supporting driver assistance features capable of higher levels of autonomy.

There is nothing new here in terms of what people expect from EVs, given Tesla’s lead in this area. But on the other hand, if the Fisker Ocean SUV did not have any of these solutions, no one would ever buy their EVs. It is basically expected.

However, keep in mind that the Ocean SUV has two main advantages – the Ocean has a low starting price ($37,499) and a long driving range (up to 300 miles). These benefits, not necessarily its FI-Pilot feature, although nice, are its main benefits, according to Car and Driver magazine. However, the SUV won’t be available until sometime in Q4 2022.

What Analysts Think About Fisker

Analysts are starting to warm up to FSR stock, especially due to its cheap valuation. For example, Barron’s reported on Jan. 22, that Raymond James analyst Pavel Molchanov began coverage of the stock with a “hold” recommendation. He calls the valuation for the stock “intriguing,” although its path won’t be smooth.

He is concerned about competition in the EV field, both from new entrants, as well as from legacy automakers. However, the valuation of FSR stock “by the standards of the red-hot EV space is quite moderate.”

FSR stock trades for roughly one time his 2024 estimates. By contrast, TSLA stock trades for nine times 2024 sales estimates. But, of course, TSLA has real production and a real self-driving software product.

So there deserves to be a discount for FSR stock. But a nine-times difference might be too cheap. That is one of the reasons why I believe FSR stock will appreciate over the next year. This will come into focus as we get closer to the time when the company will deliver its first SUVs in 2022.

What to Do With FSR Stock

Most investors in FSR stock today can expect to see a doubling of the stock to at least $30 per share. However, the time frame over which that will happen may get extended.

However, even if it takes three years to happen, the expected return is 26% per year on a compound basis each year. And, of course, if only over two years, that works out to a higher 41.4% annual return over the two years. These are acceptable ROIs for most investors.

On the date of publication, Mark R. Hake holds a long position in Tesla (TSLA) stock.

Mark Hake writes articles on personal investing at mrhake.medium.com and runs the Total Yield Value Guide which you can review here.

Mark Hake writes about personal finance on mrhake.medium.com, Newsbreak.com and Beehiiv.com.


Article printed from InvestorPlace Media, https://investorplace.com/2021/01/fsr-stock-is-likely-to-double-over-two-or-three-years/.

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