Among all the speculative financial instruments on the market, Special Purpose Acquisition Companies, or SPACs, are the riskiest. Fortunately, however, Fisker (NYSE:FSR) is one former SPAC whose business model is attracting investors. FSR stock has rebounded from its mid-May low of $10 to $18.65 this afternoon and could head higher in the long-term.
Investors have plenty of electric-vehicle stocks to consider. What makes Fisker so special?
Upbeat Sentiment Towards Fisker’s SUV
On May 21, Fisker announced that it would make the first all-electric Papal Transport vehicle for Pope Francis. Fisker CEO Henrik Fisker said he was inspired by Pope Francis’ ample consideration for the environment. T
he CEO noted that the interior of the Fisker Ocean would be entirely made of recycled materials. Its carpets, for example, will be made from recycled plastic bottles from oceans.
When the Pope uses Fisker’s Ocean SUV, the company will get plenty of free advertising. Fisker projected that it would start producing this SUV in November 2022. It has already received over 16,000 pre-orders for the EV.
At least 75% of those reservations are likely to turn into sales, and the reservation total is likely to climb. The Fisker Ocean costs only $37,499, excluding subsidies. In Germany, the SUV will cost 32,000 EUR.
In the U.S., subsidies will widen the price gap between Tesla’s (NASDAQ:TSLA) Model Y and X and the Fisker Ocean. Furthermore, Tesla fans may lose interest in the product when Fisker launches its SUV.
Heated Competition
Tesla is not the only EV maker facing fierce competition. Fisker needs to watch out for Lucid Motors, which is poised to merge with the Churchill Capital Corp IV (NYSE:CCIV) SPAC.
Also, the old automakers are ramping up their EV projects. For example, General Motors (NYSE:GM) is budgeting billions of dollars to electrify its automobiles and SUVs. Ford Motor (NYSE:F) closed at multi-decade highs last week after unveiling its F-150 EV.
But Ford’s electric trucks and GM’s EVs will not compete directly with Fisker. The latter company will benefit from a generous government subsidy, and the Ocean’s low price should drive demand for many years.
Fisker’s Opportunity
In 2023, Fisker will deliver up to 700 vehicles. This strong, initial delivery figure suggests that FSR stock is undervalued. The company’s global growth plan should enable its sales to accelerate after the initial launch of the Ocean.
Last December, Fisker said that it would partner with Cox Automotive and Rivus. The latter two firms will provide after-sales services to Ocean owners across the U.K., limiting Fisker’s post-launch operating costs and making the company’s outlook more certain.
Fisker has opened “customer experience centers” in many major cities this year. The move should raise awareness about Fisker and the Ocean among consumers. By the time the Ocean hits the market, orders for it should increase steadily.
FSR stock is currently trading at a deep discount. Investors who buy the shares now will be rewarded when Fisker’s revenue steadily rises for the next few years.
On Wall Street, analysts have an average price target of $24 on FSR stock. And based on its forecast of Fisker’s future cash flows, simplywall.st thinks the stock is worth over $100.
According to both forecasts, Fisker is trading at a steep discount compared to its future value.
The Bottom Line on FSR Stock
Investors could buy the shares of established EV firms like Tesla. Yet demand for Fisker’s SUV could soar as consumers’ awareness of its brand increases. FSR stock does not currently reflect that potential.
Investors are starting to recognize that consumers’ interest in the company’s offerings is intensifying.
On the date of publication, Chris Lau 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.
