It’s been so long since InvestorPlace editors have called my number to write about Fisker (NYSE:FSR), I’d completely forgotten about the electric vehicle (EV) startup and FSR stock.
In my last article about the company in late December, I suggested that the second go around building an EV would be different for Henrik Fisker. I also suggested it was an excellent long-term buy around $15.
EV investors may have rotated out of the two biggest EV producers and into some of the more speculative plays. That said, it’s not the kind of performance investors have come to expect from electrification investments.
Is this a problem for FSR heading into the summer? I don’t think so, and here’s why.
FSR Stock and Foxconn
When I last read about Foxconn in 2020, its Wisconsin investment remained a debacle. However, on Feb. 24, Foxconn and Fisker announced they had signed a memorandum of understanding (MOU) to build EVs together. Foxconn will build up to 250,000 of Fisker’s second vehicle concept.
Fisker’s first vehicle, the Ocean SUV, is slated to begin production in Q4 2022. It is being built by Magna International (NYSE:MGA). The second vehicle is projected to roll off the Foxconn assembly line in Q4 2023.
“The new collaboration between Foxconn and Fisker will revolutionize the automotive industry model by introducing ICT [Information and Communication Technology] capabilities – which help automakers accelerate their transition to new, innovative, and efficient manufacturing processes and business models,” stated its joint press release.
As a result, it will cut the time it takes to bring a new vehicle to market by half. That’s a game-changer (if it works) for the development of EVs.
The big question is where Foxconn is going to build its second EV.
InvestorPlace’s Alex Sirois wrote about the partnership on April 1. He suggested Foxconn’s factory in Wisconsin could be where Fisker No. 2 is built.
A Forbes article appeared shortly after the two companies announced their plans for a second vehicle. It discussed why Foxconn deciding to produce EVs at its empty factory in Wisconsin would be a victory snatched from the hands of defeat.
“If Fisker ends up building electric vehicles with Foxconn Technology Group in Wisconsin, as seems likely, the stunning new development could make a huge winner out of what was an economic-development disaster — and put the state back into the business of making cars for the first time in 13 years,” wrote Forbes contributor Dale Buss.
Buss noted that Foxconn is currently negotiating with the Wisconsin Economic Development Corp. to renegotiate its deal with the state. Ostensibly, I would imagine, so that it can produce EVs rather than TVs.
Imagine more American-made EVs. President Joe Biden would like that, I’m sure. But it’s not a done deal just yet.
Thomas J. Falk Distinguished Chair in Business Russ Coff is quoted in The Badger Herald. He’s skeptical Foxconn’s negotiations will lead to any substantial automotive production in Wisconsin.
“‘I would be very surprised if they located a major manufacturing plant here,’ Coff said. ‘Having said that, it’s not impossible that some components could be produced in Wisconsin, but I’m not expecting a very large assembly facility to be placed here.’”
Now, that doesn’t mean Foxconn won’t build an automotive assembly in America. It just means that it might not be located in Wisconsin. Let’s not forget that many cars get built in Mexico, where labor costs are lower.
However, if they ultimately get built in America, you can bet FSR stock will be higher than $17.
The Bottom Line
InvestorPlace’s Matt McCall believes that EV bulls can do better than Fisker. Further, the competition could send FSR stock to new lows as a result. Ultimately, he believes the rewards don’t equal the risks.
I would politely disagree.
Is Fisker a speculative investment? You bet. But that doesn’t mean that the agreements Fisker’s pulled together with Magna and Foxconn aren’t worth the paper they’re written on.
Both Magna and Foxconn want in on the electrification of transportation. Fisker is one way to do that. I’m sure both companies are a long way from being finished signing agreements with EV producers, big and small.
Like I said in December, if you can buy close to $15, the risk/reward starts to work in your favor.
Long-term, I’ve read nothing that changes my mind. It’s an excellent long-term buy, albeit a speculative one. If it stays on its timeline, I could see FSR hitting $20 in 2021.
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.