On the back of a Monday session that saw shares of electric vehicle firm – can’t really call it a manufacturer yet – Fisker (NYSE:FSR) jump 5.5%, the shareholder in me is tempted to pound the table on this aspirational investment. However, I must temper the enthusiasm for FSR stock, noting that on a year-to-date basis, the equity unit has only moved up only 1%.
Considering the near-100% speculative nature of Fisker and the fact that it has yet to be operational, you might be tempted to view this as a foolish bet. In many ways – and despite my personal ownership of FSR stock – I don’t necessarily disagree. Look, I’m a cryptocurrency investor. FSR is not the first time I’ve been labeled a fool and I can absolutely guarantee you it will not be the last.
Admittedly, Fisker is a lower-confidence wager in the grand scheme of things. For those who are thinking about chancing FSR stock, I highly recommend you read InvestorPlace contributor Vandita Jadeja’s take. While the company has impressive sales reservations, “only time will tell” whether “consumers are happy with their vehicle or not.” Further, Fisker is taking huge strategic risks, with Jadeja pointing out the following:
The first vehicle line will start off assembly lines in the fourth quarter of 2022 and Fisker has already started working on the second. I think that the company is focusing on more than one vehicle unnecessarily. Like several other EV makers, Fisker should first focus on the first vehicle and launch it before working on the next in line.
By the way, my colleague is a certified public accountant, so she knows a thing or two about assessing risk. FSR stock is chock-full of it. So, why bother investing in it at all?
FSR Stock Banks on the Right Idea, Not the Right Production
In concluding her analysis of FSR stock, Jadeja rightfully points out that a company with no production has significant risks relative to a company with production (or on the verge of production). Therefore, she gave the below wise summary:
If you are keen on investing in EV stocks, there are several other options to consider. Stay away from FSR stock until it starts production because it will not move much over the next few months. Marketing efforts and partnerships can only take the stock to a certain high, but it will eventually dip.
Again, this investment isn’t for everyone. But it’s also fair to point out that production isn’t the end-all, be-all. For instance, the DeLorean Motor Company also produced actual cars and to be fair, the vehicle served as the underlying platform for Dr. Emmett Brown’s invention of the flux capacitor. But lack of demand eventually crumbled the company.
In other words, just because you make something doesn’t mean people will buy it. But doesn’t that put FSR stock in a bad situation? No one’s going to drive an idea.
However, the investment thesis for Fisker is that it’s a good idea and that the downwind element of production – which is a commoditized component – is easier to manage than to sell a bad idea that’s already manufactured. Further, the Pew Research Center indirectly backs up this point.
According to its survey, EVs have garnered a mixed reception regarding demand. While most agree that EVs are better for the environment, they’re not wholly convinced yet to make the plunge with their dollars.
You know what would help in this equation? Building EVs that are attractive, that resonate with combustion-car buyers but feature clean next-generation technologies.
Sex Appeal: It’s What Fisker Does
In prior write-ups about FSR stock, you’ve heard me talk nonstop about the underlying company’s founder, Henrik Fisker. As a renowned automotive designer, he has his pulse on car culture in a way that competitors can only dream about. Indeed, when other companies are producing strange-looking EVs, he’s creating true art – and at a price that won’t destroy the bank.
Honestly, it’s going to be very difficult to convince a lukewarm audience to make the jump with an EV featuring an extreme avant-garde design or lacking normal functionality, such as three-wheeled electric trikes. You need to butter up the consumer base with relatable products, then hit them later with an LSD trip-inspired vehicle.
And in this case, the butter of FSR stock isn’t the grocery-store fare that you can pick up for a buck a pop. No, this is La Conviette butter, shipped from the rolling farmlands of France. It’s just going to be a while for it to get here. If you can handle the wait – and the potential logistics risks – then maybe Fisker is right for you.
On the date of publication, Josh Enomoto held a LONG position in FSR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
