My prediction for Fisker (NYSE:FSR) stock remains the same as it has always been: It should rise as the Fisker Ocean nears its production start in November.
I believe the Ocean will be a success because the company has made wise production decisions. That implies that its share price should rise following initial deliveries as well. I also believe that to be the case.
However, FSR stock has trended down since mid-November. It’s difficult to pinpoint exactly what precipitated that downturn. Certainly it had something to do with rising interest rates and tightening fiscal policy. That doesn’t bode well for growth-oriented tech companies, Fisker among them.
It also had something to do with earnings which were released weeks earlier, on Nov. 3. But they really don’t matter that much to Fisker. And earnings are nearly irrelevant to Fisker’s investors now.
Here’s what I mean: Fisker’s November earnings were largely characterized by the market as a ‘disappointment’. The disappointment was that Fisker posted a 37 cent loss per share when analysts had been expecting a 34 cent loss per share.
There were no sales of consequence. Ultimately missing earnings per share (EPS) predictions by three cents is a footnote. Rising interest rate reports came out at the same time. The two conspired to send FSR stock into a downturn. It’s probably an opportunity in disguise.
That opportunity is a product of Fisker’s production decisions related to the Fisker Ocean. Those decisions will pay dividends.
Fisker decided to outsource the production of its Ocean SUV. Most analysts believe that this was a wise move on behalf of the company. It won’t have to deal with the headaches of producing an electric vehicle. If producing a vehicle from scratch is a daunting task, producing an EV, with its battery technology, is an order of magnitude more difficult.
That’s why analysts lauded the firm’s decision to leverage Magna International (NYSE:MGA) to produce the Fisker Ocean.
The two firms finalized a long-term manufacturing agreement back in the summer of 2021. Magna International has a long track record of manufacturing vehicles for brands and analysts believe this was a smart choice for Fisker.
It relieves the manufacturing burden on Fisker, freeing it to focus on marketing and sales.
Customers will begin to take delivery of the Ocean sometime after production begins in November of this year. All expectations are that they will receive a quality product based on Magna’s track record and experience.
The Bottom Line
Basically, I’m arguing that not much has changed for Fisker. Things are continuing to look good for the Fisker Ocean. It has been lauded by the awards industry as well.
That accolade aside, my point is that Fisker remains on track to deliver a strong vehicle in November. Things can change between now and November and tech stocks may not feel such pressure.
Further, Fisker will be nudging closer and closer to production as the year goes on. We’ll be hearing more and more about its progress with the Ocean. That’ll naturally drum up interest.
Otherwise, to understand why Fisker makes sense I’d look to CEO Henrik Fisker and his discussion of reservation numbers:
“Reservation growth accelerated beginning in early November. As of Jan 2, 2022, we have over 23,500 reservations (including 1,400 fleet reservations) vs. approx. 18,600 at the time of our Q3 earnings call on November 3rd and up from 10,800 as of the end of 2020. This represents an increase in reservations of 117% during 2021 and by 26% over the last two months. This significant uptick in daily reservations is very encouraging: Our single month November retail reservations of 2,600 equaled the prior six months combined.”
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.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.