Despite its recent rise, Fisker (NYSE:FSR) still looks undervalued. FSR stock still looks like it is worth at least $30 per share. That represents a potential gain of 38% from today’s price of $21.74 (Mar. 8).
Fisker stock is up 42% in the past month and 45.4% year-to-date. Since my last article on FSR stock on Jan. 28, when it was at $15.46, it is up 40.6%. I suspect that the stock could easily hit its target price within the next year, if not before. Moreover, I have raised my target price to $31.96, or 47% higher.
One reason is there should be significant demand for the upcoming Fisher SUV, which begins production at the end of this year. The Ocean has a low starting price ($37,499) and a long driving range (up to 300 miles). These benefits, along with its self-driving FI-Pilot feature, 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.”
In addition, on March 3 Fisker analyst Shreyas Patil came out with an upgraded recommendation on FSR stock. Although he still considers it “speculative,” he raised his price target to $30, up from $21.00 per share.
Seeking Alpha reports that 7 analysts have an average price target of $26.17 per share. TipRanks reports that 7 analysts who have written up the stock in the last 3 months have an average price of $28.00. That represents a potential gain of 28.7 % from today’s price.
Moreover, Marketbeat.com says that 9 analysts have a consensus target price of $27.00. This could produce a gain of 24%.
In general then, most analysts agree that FSR stock remains significantly undervalued.
What Fisker Is Worth
FSR stock trades for roughly a multiple of 14 times analysts’ 2022 estimates and 55.6% of its sales forecasts for 2024. Fisker has a $5.9 billion market capitalization right now. Page 29 of its original presentation shows that it expects to have $10.6 billion in sales by 2024.
By contrast, Tesla (NASDAQ:TSLA) stock trades for 4.1 times 2024 sales estimates. For example, it has a $574 billion market value and analysts expect 2022 sales of $62 billion. Assuming sales increase 50% each year that puts its sales in 2024 at $140 billion. That puts the company’s $574 billion market value is 4.1 times the expected $140 billion in 2024 sales.
Of course, TSLA has real production and a real self-driving software product, while Fisker is still pre-production.
Fisker deserves to trade at a huge discount to Tesla. But a 7 times difference might be too cheap (i.e., 4.1 times vs. 0.556 times multiples). A more appropriate difference might be 5 times greater.
That implies that Fisker’s 2024 price-to-sales multiple should be one-fifth of Tesla’s 4.1 multiple, or 82% of sales. So multiplying 0.82 times $10.6 billion in sales in 2024 yields a target market cap of $8.69 billion. This is 47% above today’s price target, or $31.96 per share.
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
My new price target of $31.96, which represents a nearly 50% gain from current levels could be too conservative. For example, if the company really does appear to be able to produce $10.6 billion in sales by 2024, it is much more likely to be trading at 1.5x sales.
That would give the stock a potential gain of 183% to $61.61 per share (i.e., $15.9 billion market cap vs. $5.91 billion today). On the other hand, using an 18% discount rate over four years reduces the forecast market cap down to $8.2 billion. This is close to our forecast of $8.69 billion.
In other words, the fair market value for FSR stock is now $31.96, or 47% above today’s price. If it takes two years for this to occur, the average annual gain is a respectable 21.2% annually.
On the date of publication, Mark R. Hake held a long position in Tesla (TSLA) stock.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
