Fisker Stock Is a Risk Worth Taking Given Its Manufacturing Plans

Fisker (NYSE:FSR) stock makes a lot of sense for those who want to get in on a ground floor investment in an emerging EV brand.

Mobile phone with company logo of US electric vehicle manufacturer Fisker Inc. on screen in front of webpage
Source: T. Schneider / Shutterstock.com

Investors who choose to do so will be making a risky decision given that Fisker isn’t scheduled to produce a vehicle until Nov. 17, 2022. That’s roughly 16 months from now. 

A lot can happen between then and now, but the upside in taking such a risky decision is simply the premium that such a risk rewards.

If the Ocean, Fisker’s first EV, truly begins production in 16 months and is well received then, current investors will be rewarded handsomely.

The good news is, there is reason to believe that the Fisker Ocean should be a success.

Outsourced Manufacturing and FSR Stock

The Fisker Ocean is not being manufactured in-house. Rather, Fisker has partnered with auto supplier Magna International (NYSE:MGA). While Magna may not be a household automotive name, it does handle manufacturing for some of the biggest worldwide automotive brands, and it is prolific in doing so.

According toMotorTrend: “The Magna Steyr plant in Graz, Austria, has built 3.7 million vehicles with about 30 different nameplates, over the years, including Chrysler, Jeep, Mercedes, Jaguar, BMW, and Toyota badges, to name a few. The plant, with the capacity to assemble 200,000 vehicles a year, has also ventured into electric vehicles. It makes the Jaguar I-Pace, and in late 2022 Magna will make the 2022 Fisker Ocean electric SUV in Graz.”

Magna itself is interesting as an investment play in EVs and opened a plant in China in 2020 with an annual production capacity of 180,000 vehicles.

The company also notes that it may be time to add production capacity in North America after long hinting at the prospect. That aside, Magna’s strong track record should lessen the worries of FSR stock investors. 

Magna’s pedigree certainly makes the prospect of Fisker Ocean production beginning on Nov. 17, 2022 seem much more likely than if Fisker had chosen to do so in-house. 

The Fisker Ocean SUV will be based on a Magna-developed EV platform modified for Fisker.

The two companies recently agreed to continue the manufacturing agreement through 2029. Fisker calls the strategy ‘asset light’ and it is, but it plainly seems to be a smart move on the part of the company. 

Does this make FSR stock an absolute buy? No, but it does give the company advantages.

Financially speaking Fisker looks like you might expect. It is incurring significant losses in its pre-production stages, but they’re lower than if it were to attack production in-house.

What To Expect on Aug. 5 

Fisker will release its second-quarter earnings on Aug. 5. There shouldn’t be anything significant to note from a fundamental perspective.

Fisker ended the first quarter with cash and cash equivalents of $985.4 million and zero debt. Back in May Fisker’s management noted that it anticipates slightly higher R&D expenditures in Q2, but overall spending to be somewhat lower. 

I assume the most rigid analysts will be watching those figures closely. However, even in the case that the guidance is slightly off investors likely won’t care much. The truth remains that shares shouldn’t have any fundamental reason to move drastically before that 2022 production date commences. 

Fisker looks to be relatively sheltered from the chip shortage that has hit other vehicle manufacturers. Henrik Fisker seems confident that that is the case, according to the InvestorPlace research staff.

The team noted : “With production not scheduled to start for more than a year (time for supplies to improve?) and a chief technology officer (CTO) with a chip industry background, Fisker is confident the current shortage will not impact the Ocean.

Investors should take confidence in Fisker stock’s prospects given how well it has strategized in respect to its Ocean SUV.

On the date of publication, Alex Sirois 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.


Article printed from InvestorPlace Media, https://investorplace.com/2021/07/frs-stock-is-a-risk-worth-taking-given-its-manufacturing-plans/.

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