Fisker (NYSE:FSR) may be trending higher lately. However, after its wild moves throughout the year, I wouldn’t take this to mean it’s a smooth ride ahead for FSR stock. As an early stage EV (electric vehicle) company, expect it to stay bumpy.
About a year away from delivering its first vehicle, there’s still a lot of uncertainty here. Its unique approach, where it’s working with different manufacturers to bring out separate models to market, may pay off.
But there’s a lot that could happen between now and its true “payoff moment” that could result in investor confidence taking a hit. This would cause the stock to make another sharp move lower. Even so, its high chances of continued volatility shouldn’t be construed as a warning sign.
Why?
So far, it has stuck to its production timeline. With its “unique approach,” it may be able to avoid future hiccups, and stay on schedule. Once it inches closer to making its first deliveries, assuming the demand is there, uncertainty will clear up. Then the stock will likely have little problem making its way to higher prices.
The Latest With FSR Stock
Renewed bullishness for EV stocks may or may not be in the driver’s seat when it comes to Fisker’s recent rally. Other high-profile EV stocks have been making similar moves recently.
However, the FSR stock rally may be coming to an end, due to the release of its most recent quarterly results. The results themselves aren’t that unexpected. Losses for the recent quarter (ending on Sept. 30) more than doubled year-after-year, but only because the company is ramping up its production efforts. Its guidance for its 2021 operating expenditures also came in line with expectations.
Why may investors react negatively to this news, even if it doesn’t change the story? Again, it emphasizes how this is a pre-revenue company. In other words, it’s a startup that’s still a year away from showing whether it stands to become the next Tesla (NASDAQ:TSLA). Or, if it’s more likely to have little, if any, commercial success.
A pullback from here, though, may be an opportunity. At least for investors patient enough to hold it until 2023, when the rollout of its vehicles is set to happen with full force.
Many remain skeptical that this company, which is one of the smaller early stage names looking to take on Tesla, can actually put up a fight. But given the advantages of the path it’s taking to get there, it’s too soon to say it’s not going to work.
Why Its ‘Unique Approach’ May Prevail
Fisker differs from a lot of the other emerging EV companies in the way it’s approaching production. Partnering with large manufacturers like Magna International (NYSE:MGA), its partner for the Ocean SUV, and Foxconn, its partner for another SUV model, FSR is outsourcing production.
This asset-light strategy has many advantages. Going with this approach means lower upfront costs. Not to mention, fewer hiccups. You may remember Tesla experiencing many of these in the years before it started to take off. On top of all this, by leaving the production activities to third-parties, Fisker’s management can focus on what may matter most: design.
A lot has been said about the company’s pricing strategy with the Ocean SUV. By pricing this model at $37,499, FSR is positioning itself as a mass-market brand. Yet it may be the design of this vehicle, and its features, that matter most at the end of the day. Getting it right in these areas is key. Otherwise, it’ll be tough for it to beat out the legacy automakers who dominate the mass-market, and are quickly rolling out EVs of their own.
Fortunately, based on the additional details that have come out about the Ocean, it appears up for the challenge. Frisker is set to debut the production version of it at the Los Angeles Auto Show later this month. If the Ocean’s auto show debut is well received, it may bolster confidence in this company, and by extension, FSR stock.
The Verdict With Fisker
Its future is far from certain, so expect volatility to persist when it comes to Fisker shares. Its game plan seems like one that minimizes risk, yet it still leaves the door open for a big “payoff” moment down the road. Until it’s out of the pre-revenue stage, the market will hold mixed feelings about it.
I give it a “B” grade in my Portfolio Grader.
This may not be a stock for everyone. If you’re risk averse, you may want to seek opportunities elsewhere. But if you seek out, rather than steer clear, of high-risk plays? You may want to charge ahead with FSR stock.
In the coming year, it could become one of Wall Street’s favorite EV stocks.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (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.
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