As Fisker (NYSE:FSR) and other electric car start-ups get closer to market, the risk in FSR stock becomes real. It’s one thing to bet on the paper of promises, something else to bet on a company building cars.
Speculators began abandoning electric car start-ups in mid-February. FSR stock was just one of the casualties. FSR stock opens for trade April 26 at about $14 per share, a market cap of $4.39 billion.
There’s still no revenue, but you can now get in for half what it would have cost on Feb. 26, and manufacturing plans are set.
Does that make Fisker a bargain?
FSR Stock Risk Remains the Same
I’ve been harder on FSR stock than most InvestorPlace writers. It’s because I look for long-term investments, not long-shot speculations.
I’ve compared Fisker with Preston Tucker, whose company failed. (At least Tucker got a good movie out of it, directed by Francis Ford Coppola, whose wine company succeeded.)
This was a little unfair. Tucker was selling dreams into a mature market. Henrik Fisker has been selling real designs into a new market. He’s been doing it a long time. His first failure came in 2007 because he was too early to the market. A hybrid based on that design is now coming out from a Chinese company. This time, with Tesla (NASDAQ:TSLA) having proven itself, Goldman Sachs (NYSE:GS) says Fisker is too late.
Fisker knows the risk, so the company is trying to do things differently this time. First, Fisker is focused on design, with solar panels on the roof and recycled materials in the body. Second, Fisker designed its first car, the Ocean, to be leased rather than sold. The company has a manufacturing agreement with Magna International (NYSE:MGA). Finally, Fisker now has private financing, $1 billion from a SPAC called Spartan Energy Acquisition.
There Will Be Cars
While FSR stock was peaking, Fisker announced preliminary agreement on a U.S. production facility, this time with Hon Hai Precision of Taiwan, commonly known as Foxconn. Hon Hai has a basic production platform and could making 250,000 Fiskers per year starting late next year. Unfortunately, Foxconn’s failure to perform on a previous incentive-laden deal with Wisconsin has analysts there doubting anything will come of this.
Previously bullish analysts are also bearish on Henrik Fisker weighing in on possible incentives in the Biden Administration’s American Jobs Plan. Some $100 billion is earmarked to build an electric vehicle market. Fisker’s “75 and more for 55 and less” plan would deliver fat rebates only to cars costing $55,000 and less. Guess which cars Fisker is making.
Our Luke Lango says you should ignore Goldman Sachs and buy Fisker stock. He believes the Fisker Ocean will be a stand-out, a $37,500 car with 350 miles of range that looks good and can draw strong margins. A late 2022 launch won’t be too late, because the market will be ready.
Luke isn’t alone in his optimism. While Goldman Sachs has been saying sell, Morgan Stanley (NYSE:MS) and Bank of America (NYSE:BAC) have been saying buy, highlighting a “world-class design team and great partners.”
The Bottom Line on Fisker Stock
No one really knows what will happen with Fisker.
Fisker could be a winner, taking market share from Tesla. But it must execute.
Despite not producing any cars or generating revenue, Fisker had a good first quarter. It is on track to enter the market with real cars whose manufacturing can be scaled.
This makes Fisker stock something you can speculate on. Just remember, that’s what you’re doing. Don’t put any money into Fisker you can’t afford to lose. It’s not time to invest in Fisker, but you can take a flutter on FSR stock.
At the time of publication, Dana Blankenhorn directly owned shares in BAC.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack newsletter.
