Back in February, Fisker (NYSE:FSR) briefly received the level of investor enthusiasm it has long deserved. Shares in the electric vehicle (EV) startup soared from around $15 to prices above $28 in early March. But, after the recent correction in electric vehicle stocks, FSR stock fell back towards prior price levels. Today, it changes hands at around $17 per share.
However, while that bout of enthusiasm didn’t last for long, it may come back. Why? Because other EV startups — like Lucid Motors, which will soon go public via its merger with special purpose acquisition company (SPAC) Churchill Capital IV (NYSE:CCIV) — have recently received a greater level of attention. And rightfully so.
Of course, Fisker’s not the front runner to take on established EV names like Tesla (NASDAQ:TSLA) or auto industry incumbents like Volkswagen (OTCMKT:VWAGY). But, you could call it a dark horse contender. That is to say, Fisker is quietly putting things in motion and by the time it releases its flagship vehicle, the Ocean SUV, it could unexpectedly grab a larger-than-expected share of the market.
More positive news regarding the Ocean could help propel shares back above $20. But, even with its recent recovery, the EV sector may still be at risk of another pullback. That makes it wise to approach this cautiously. Yet, as one of the less hyped-up EV names out there, downside risk could be minimal with FSR stock.
FSR Stock and Its Underdog Status
Compared to CCIV stock, as well as other once-hot EV SPAC plays like Lordstown (NASDAQ:RIDE), Fisker has held up relatively well. Both have fallen considerably off their highs. In fact, after hitting prices above $30 per share, RIDE stock is back down near its offering price today.
Can FSR stock continue to hold onto its gains, even as it’s still a relative underdog among EV startups? Yes. True, its Ocean SUV won’t start rolling off the assembly line until late next year. But, this company has made the right moves when it comes to setting up operations.
As you may know, Fisker isn’t trying to build its own infrastructure. Instead, it’s partnering with automotive giant Magna (NYSE:MGA) for not just manufacturing but engineering and “platform sharing” as well.
This partnership will play a key role in Fisker’s long-term success. Yet, it’s not the only factor on the company’s side. There’s another factor that could help make FSR stock a long-term winner, even as the competition heats up in the “mass affluent” segment of the EV market.
Assessing Fisker’s Pricing Strategy
The company’s asset-light, outsourced manufacturing strategy is just one variable that may work in its favor. The fact it’s focusing on the more price-conscious end of the premium SUV market may help it find success as well. Given Tesla’s willingness to cut prices as of late, having a lower-priced option could come in handy.
Much like Lucid, Fisker has the ingredients in place for long-term success. However, that’s not to say either name will dominate this space, especially given how old-school car markers — like Volkswagen, General Motors (NYSE:GM) and others — are looking to move into EVs in a big way.
The company is trying to go more for the “mass affluent” market. This may give Fisker a better chance to succeed, while Lucid and Tesla duke it out on the higher-end front. Yet, that does leave the company more vulnerable to incumbents like Volkswagen.
Also, with it being more than a year until the Ocean hits the streets, a lot could happen with FSR stock between now and then. Investor impatience could put downward pressure on this name. After attempting to start a recovery, EV stocks in general could continue to fall off their recent highs.
This may mean that it will take time for this electrification play to truly pay off. But, it doesn’t necessarily mean there’s big downside risk on the table. Short-term performance may wind up choppy. However, the chance of gains continues to exceed the risk of losses.
Bottom Line: A Worthwhile Cautious Buy
Given its underappreciated strengths, Fisker may be worth a look at today’s prices. It’s still in its early stages. But, smartly partnering with Magna and focusing on the mass affluent market, the company could prove its skeptics wrong once the Ocean debuts.
Shares could see some volatility in the near-term. With that in mind, “tread carefully” may be the key phrase here. Yet, with its potential not fully factored into the FSR stock price, this EV play may be one of the best ways to play the overall trend.
In short, consider FSR a cautious buy today, but a screaming buy if it falls further towards the $10 per share offering price.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.