The party may be over for special purpose acquisition company (SPAC) stocks. But, that doesn’t mean you should pass on buying former SPAC and EV play Fisker (NYSE:FSR) stock. We have more than a year to go before its Ocean SUV starts rolling off the assembly line.
FSR stock remains one of the most solid early-stage EV plays out there. Similar to Lucid Motors, which is in the process of merging with SPAC Churchill Capital IV (NYSE:CCIV), Fisker has many of the same “ingredients of success” in place to give it a strong chance of scaling into a profitable automaker.
As seen from recent developments, it continues to make slow-and-steady progress. This may not move the needle further for shares right now. But, over the next year, this company’s future becomes more clear, shares could gain tremendously from today’s price levels (around $13.38 per share).
Quarterly Update Shows FSR Stock is Still on Track
SPACs and former SPACs alike took a beating this spring. And, Fisker stock was no exception. After rallying to as much as $31.96 per share (mainly due to the late-winter mania over “meme stocks” and “story stocks”), it briefly plummeted to single-digit prices (below its $10 per share offering price) earlier this month.
But, following the company’s most recent quarterly update, shares have been trending upward. As some analysts, like Raymond James’ Pavel Molchanov, have stated, the updates came with little to no surprises. Yet, while it didn’t exactly wow the analyst community, it did signal things are still on track for this budding automaker, and in turn, FSR stock.
What do I mean by “on track?” For one, reservation numbers for the Ocean continue to rise. Starting off the year at 12,000, it’s now up to 16,000. Also, the company stated, albeit vaguely, that it’s making progress with battery sourcing. Again, nothing game-changing came about from the update. Yet, relative to some of the other upstart EV makers, Fisker has managed to continually make slow-and-steady progress, with few hiccups.
Following the SPAC sell-off, individual investors are no longer bidding up such plays. In other words, don’t expect investors to get excited again all of a sudden, and bid this back up to its past highs in a matter of weeks/months. But, for more patient investors? Buying now, as shares remain under $15 per share, could pay off down the road. With its solid foundation, coupled with the aforementioned progress, there is a path for the stock to gradually bounce back.
Patience Remains The Keyword
Besides the SPAC stock investing trend, another factor helping FSR stock to soar was the off-the-charts enthusiasm for EV plays. Kicked off last summer, when the rising tide of Tesla (NASDAQ:TSLA) lifted all EV boats, the trend carried on into 2021, thanks to the “blue wave” U.S. election results helping to bolster the narrative (that EVs would gain critical mass sooner than expected).
However, this dynamic is no longer in play, either. The “EV megatrend” may still be alive and well. Just don’t expect investors to consider these “buys at any price” again anytime soon. Instead, they’re looking at them with a more critical eye. For weaker EV plays, that’s bad news. But, it’s likely not going to have much further impact on Fisker shares.
Why? Not just for the slow-and-steady progress I discussed above. Compared to other early stage names, this company started off with a more solid foundation. Mainly, I’m talking about the company’s partnership with Magna (NYSE:MGA). Providing manufacturing, engineering and “platform sharing” support to Fisker, the company has an experienced partner providing both expertise and infrastructure. Compare that to startups like Lordstown (NASDAQ:RIDE), whose “go it alone” strategy is the likely cause of many of its hiccups highlighted in a much-discussed “short report.”
This, along with its strong cash position (around $1 billion), gives it a strong chance of finding success in the coming years. This may not help boost the stock today. But, over the next year or so? As it becomes clear this company will not only survive, but thrive, investors will dive back in, sending shares back up to prior price levels.
Bottom Line: FSR Stock Is a Strong Long-Term Play
The factors mentioned above give it a shot at success. But, it’s not set in stone it will prevail. As incumbent automakers like Volkswagen (OTCMKTS:VWAGY) bet big on EVs, this lesser-known company could be at a disadvantage, as it tries to grab a piece of the “mass affluent” SUV market.
Yet, with the aforementioned foundation in place, coupled with the lessons it learned from the failure of its predecessor, consider FSR stock a worthwhile (but still risky) long-term EV play at today’s prices.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.