Fisker (NYSE:FSR) stock took a bit of a beating after disappointing on Q3 results, but it isn’t a definite reason to dump the electric vehicle maker.
The demand for electric vehicles is nowhere close to slowing down. With rising competition, there are high expectations of consumers from every automaker. Despite stating that the production of Fisker Ocean is on track, the company reported a significant loss which dinged FSR stock at the time.
It reported a loss of $110 million or 37 cents a share as compared to the loss of 16 cents a share last year. The company has successfully completed the critical sourcing phase for the SUV.
FSR stock was trading at $14 on October 5 and is trading close to $19 today, much lower than its all-time high of $31. The stock declined after the results. Here is one reason to consider and one reason to avoid FSR stock.
Revenue and Profit on Hold
Fisker will be revealing more details about the vehicle and will start the marketing phase in the next two weeks. Fisker expects operating and capital expenses to range between $490 million to $530 million. It will begin production of the Ocean in November 2022 and it will be priced at $37,500.
Fisker generated only $15,000 in revenue and reported a net loss of $1,000. It reported a cash balance of $1.40 including a bond offering which improved its cash flow condition. Fisker is pre-revenue but once it begins production, things could rapidly change.
The cash raised by Fisker will come in handy as the company tries to meet the production timeline. It has spent a significant amount of money on research and development which hit $99.3 million in this quarter.
This shows that the company is taking the right steps towards the production of its first SUV, but one should not expect it to report revenue or profit for a few years to come. FSR stock may not see big highs until the production begins.
Consumers Are Confident About Ocean SUV
We still have to wait for a long time before we get to see the Fisker Ocean on the road. Until then, we will only see the marketing efforts and production plans that are on paper.
The company is on target to launch the SUV next year with deliveries beginning in late 2022. The company has signed an agreement with Contemporary Amperex Technology (CATL), a China-based battery supplier for the battery capacity of Ocean SUV.
CATL will be supplying two types of batteries, one with a capacity of more than 5 GWh each year, from 2023 to 2025. The second one will be based on lithium-ion phosphate chemistry.
Both the companies have been working to develop battery options for the vehicle since 2020. The battery will have direct charging from the optional solar roof.
It already has 17,500 retail reservations and 1,400 fleet reservations for the vehicles. This shows consumer confidence in the model even before it hits the market.
The Bottom Line on FSR Stock
Fisker is a pre-revenue company so it is tough to judge it based on the financials. The company is in line with the production schedule but the balance sheet numbers are unimpressive.
FSR stock could become a long-time buy but wait till you see the company go into production. It is too soon to judge the company at the current stage. The company may be in line with the production schedule but it is still a year away from that.
It does not make sense to invest your money in FSR stock and wait until next year for the company to begin production. You can consider other EV plays instead of FSR stock.
It is a good company and the car may have wide consumer interest but it pays to wait before putting your money in it. Keeping the numbers aside, the company looks well prepared for production and is making the right investment towards it. However, it does not hurt to wait for a dip.
On the date of publication, Vandita Jadeja 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.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long-term gains. Her knowledge of words and numbers helps her write clear stock analysis.
