After Tesla (NASDAQ:TSLA) stock jumped over 500% from its 2020 lows, investors who missed that trade are determined to find the next big opportunity in the electric-vehicle space. Fisker (NYSE:FSR) is one of many electric-vehicle makers that want to take market share from Tesla. If Fisker accomplishes that goal, FSR stock might eventually look like a bargain at its current levels.
FSR Stock Spiked and Then Slumped
On at least four occasions, Fisker stock more than doubled, only to sell off sharply afterward. The EV stock is not attracting buy-and-hold investors. Instead, speculators are trading the name, and that’s not helping the company boost investors’ confidence in its shares.
On April 6, Fisker CEO Henrik Fisker stated on Twitter that Fisker’s electric SUV, the Ocean, would cost only $37,499 before the $7,500 federal tax credit. So if Congress raises the tax credit, Fisker’s EV will cost well under $30,000. Last week, rumors circulated that the EV tax credit would increase to $10,000.
If Fisker’s EV sells for meaningfully less than $30,000, Fisker will not only end Tesla’s dominance of the sector, but it will also compete effectively with the makers of traditional vehicles with internal combustion engines.
In July 2020, Fisker had 7,062 orders for the Ocean. By comparison, Tesla had more than 713,000. reservations for its cybertruck at that time.
Fisker will not report any revenue until the Ocean hits the market. It will start producing the EV in the fourth quarter of this year. Customers can receive the Ocean in 2022.
Even though the Ocean’s starting price is very low, Fisker is offering affordable leases of the EV that may further disrupt Tesla’s business model. Customers who want to lease the EV must make a down payment of $2,999., including initiation and activation fees. They will then pay only $379 per month and be able to drive their Oceans 30,000 miles annually.
Fisker is betting that removing the barriers of high EV prices will enable it to attract more customers. So far, the company does not have as many reservations as it needs to justify the $3.58 billion market capitalization of FSR stock.
Fisker has supply deals with Magna (NYSE:MGA) and Foxconn. Magna will develop an Advanced Driver Assistance System for Fisker’s Ocean SUV. Foxconn and Fisker will co-develop the EV as Fisker’s global market grows.
So investors who are reluctant to invest in Fisker at this time can buy MGA stock instead. Since Manga’s stock price is way above its yearly lows, investors should wait for it to fall further before buying the shares. Conversely, Fisker stock is nowhere near its March peak of almost $32. At its current levels, the EV stock looks like a worthwhile bet.
Fisker’s market capitalization is not anywhere near that of the other major EV firms. For example, Nio (NYSE:NIO), which is well off its all-time high of about $67, trades at a market capitalization of $60 billion. Similarly, Tesla stock is well off its highs, but its market capitalization is $680 billion.
Investors are most confident in Tesla because of the strength of its brand and its strong record of delivering new products successfully. When it reports its quarterly results, strong delivery figures will give investors another reason to buy Tesla stock.
On Wall Street, analysts have an average price target of almost $27 on FSR stock, according to Tipranks.
The Bottom Line
Fisker is one of many new EV stocks that investors may bet on. Fisker will try to take some of Tesla’s market share. To do so, all it needs is positive reviews on the Ocean after it’s released. Given the EV’s relatively low price, many customers may decide to buy it. As Fisker’s sales soar in the coming years, those who buy FSR stock now will make big profits.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article.