As one of the various EV players to come to market during the SPAC boom of late-2020, Fisker (NYSE:FSR) has provided an intriguing speculative thesis for long-term EV investors. Investors in FSR stock like the company’s product lineup, and its audacious goals.
This has been reflected in strong investor and consumer interest in Fisker’s EV offering. The company already has 14,000 preorders for its flagship Ocean EV. Indeed, an electric SUV selling at an expected retail price of $37,499 sounds pretty great to me. (The SUV also looks fantastic).
Accordingly, Fisker represents a company with real growth potential, though it is still very much a story stock right now.
I think the company’s unique approach to how it plans on bringing its Ocean EV to market is intriguing. I also think the company’s move to come public via a SPAC makes more sense than with many of its competitors who may have benefited more from waiting longer to go public.
By raising money quicker, Fisker hopes it can bring its Ocean EV to market sooner. Indeed, speed is the name of the game today, as all EV players are itching to grab a bigger slice of this growing pie.
The optimism seen in FSR stock earlier this year appears to have dissipated somewhat. Since rising to an all-time high of more than $31 in first quarter, shares of FSR can now be bought at a 50% discount. Indeed, FSR is currently trading right around the levels it started the year at, having given away all its gains.
It appears investors are losing interest with post-SPAC plays right now. However, here’s why I think FSR stock is an interesting high-risk, high-reward play for EV investors today.
A Unique Business Model Is Enticing for FSR Stock
Fisker is a relatively unique option in the EV space based on two aspects of the company’s business model I find interesting.
The first key differentiator is the company’s model built around third-party production. Fisker has manufacturing agreements signed with Magna International (NYSE:MGA) and Foxconn to build out its EV fleet. Fisker’s will therefore be taking a similar approach to that of Apple (NASDAQ:AAPL) in its quest to maximize profitability over time. Instead of building its own factories and infrastructure, Fisker will be outsourcing these capital-intensive business activities, hoping to reap higher returns on investor capital for shareholders.
Secondly, Fisker’s unique leasing model is extremely intriguing to me. I’ve always thought there is room for disruption in terms of how car buyers make their purchase. I mean, Fisker’s proposed price tag of $37,500 (which is only $30,000 after the $7,500 federal EV tax credit), puts it in the affordable range for most buyers. However, those aspirational EV buyers without the ability to borrow $30K have another option.
Fisker’s leasing model would require a $3,000 down payment and a monthly lease cost of only $379 per month. Subscription-based revenue models are all the rage these days for obvious reasons. If Fisker’s EV lineup strikes a chord with car buyers, the cash flows that could potentially be generated ought to be enticing to investors.
Fisker’s Ocean model won’t be available until at least 2022, so there’s time to assess whether or not a position in this company makes sense. It’s still a pre-revenue bet on some flashy photos and marketing material. That said, I have to reiterate – I really like the look of its Ocean model and look forward to seeing what sort of additional offerings would be on the horizon.
Fisker’s high-risk, high-reward nature reminds me a lot of Tesla (NADSAQ:TSLA) 10 years ago.
On the one hand, investors are buying into a story. Fisker’s troubled past suggests success isn’t guaranteed. Indeed, there’s no guarantee Fisker’s EV offering will ever be available to be driven off the lot. The company’s still got a ways to go to putting its cars/SUVs on the road. Accordingly, there’s a significant amount of execution risk in a stock like this.
Additionally, a valuation of $4.5 billion prices in a ton of growth. Fisker will need to do everything perfectly to justify its valuation today. Investors may be paying a 50% discount to the peak in FSR stock earlier this year. However, it’s still trading at a 50% premium to its IPO.
Right now, I’m on the fence with this one. I think it could be worth a speculative position among growth investors thinking very long-term. That said, I wouldn’t bet the farm on this one. Practicing proper portfolio sizing is important with speculative plays like this is extremely important.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.