Could this Electric Vehicle Stock Be the Next Tesla?

Fisker (FSR) has gained huge momentum after the recent closure of its merger with a SPAC. The company is on a path to the heightened competition in the electric vehicle space where Tesla (TSLA) is a dominant player. However, the release of its first flagship product is still a long way off. Find out if FSR could be a big winner like TSLA in the long run.

Fisker Inc. (FSR) engages in research, development, and production of next generation electrically powered vehicles. FSR operates in the segment where Tesla, Inc. (TSLA) is a dominant player. FSR aims to revolutionize the industry by providing the world’s most sustainable vehicles. The company is driven by its vision for clean energy and provides its customers with “the most emotionally desirable and eco-friendly electric vehicles on Earth.”

FSR was founded in 2016 as the relaunch of the Fisker brand previously known as Fisker Automotive that collapsed in 2013. The company recently went public via the SPAC merger with Spartan Energy Acquisition Corporation. FSR started trading under an independent ticker on October 30th, 2020. The stock jumped as much as 19% during its first day of trading.

The company is presently working on its first flagship model, The Fisker Ocean, an electric sports-utility vehicle (SUV). The vehicle has been billed as “The World’s Most Sustainable Vehicle,” as it features a solar roof, recycled carpeting, and vegan interior among other attractive features.

However, the company has generated no revenue to date. The company is relatively young and uncertainty related to its survival based on a number of factors, have led our proprietary ratings system to rate the stock as “Neutral.”

Here is how our proprietary POWR Ratings system evaluates FSR:

Trade Grade: B

FSR is currently trading higher than its 50-day and 200-day moving averages of $13.75 and $11.81, respectively, indicating that the stock is in an uptrend. In fact, the stock’s 43.5% return over the past month reflects solid short-term bullishness.

As the company carved-out of a reverse merger, FSR generated $1 billion from its SPAQ deal. Moreover, FSR will be taking $250 deposits for the Ocean until production gets going and expects to have no funded debt. The vehicle has over 9,000 paid deposits already, and the company expects that number to rise in 2021. Hence, FSR should be able to fully fund the development of the Ocean program all the way through its 2022 production target date.

Buy & Hold Grade: C

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, FSR is not positioned well. The stock is currently trading 21.3% below its 52-week high of $21.60.

Fisker Automotive had previously declared bankruptcy after its battery maker forced a national recall, but FSR seems determined to avoid making the same mistakes. FSR boasts an "asset light" business model. The company intends to focus on the design and marketing elements while outsourcing production to experienced third party suppliers. FSR completed the Preliminary Product Specification (PPS) gateway with Magna International Inc. (MGA) last month, to produce the Ocean SUV at MGA's European vehicle assembly facility.

FSR relies on a partner-centric approach using leased and shared manufacturing products. The company plans to provide a cheap leasing option of about $379 per month. However, allowing drivers to lease cars directly could become a financial sinkhole on its balance sheet in the long-run. Moreover, FSR will need a remarkable marketing to push its SUVs. Like TSLA, it will also have to build out its own sales network of showrooms.

Peer Grade: D

FSR is currently ranked #27 out of 33 stocks in the Auto & Vehicle Manufacturers industry. Other popular stocks in the group are Tesla, Inc. (TSLA), Nikola Corp. (NKLA) and Workhorse Group, Inc. (WKHS). All of these industry participants have comfortably beaten FSR’s 67.3% year-to-date return. While TSLA has gained 481.7% so far this year, NKLA and WKHA are up 146.3% and 651%, respectively, over this period.

Industry Rank: A

The Auto & Vehicle Manufacturers industry is ranked #22 out of the 123 industries. The companies in this industry manufacture and sell vehicles such as passenger cars, light trucks, motorcycles, and more. Demand is driven by employment and interest rates. Underutilization of production plants due to lockdowns and lower auto loan generations have severely impacted the industry. However, there has been growing excitement among the investors about the automotive industry going electric.

Overall POWR Rating: C (Neutral)

Despite its unique business model, promising product, and solid price momentum, FRS is rated “Neutral” due to its uncertain future prospects and rising competition in the EV space, as determined by the four components of our overall POWR Ratings.

Bottom Line

There’s no doubt that the EV space is starting to get crowded. FSR stock has arrived on the market just as EVs are reaching unprecedented popularity and Biden’s election win has added a spark to the already booming EV market. Hence, FSR is highly attractive at this point, but it would be prudent to wait for consequential news concerning its Ocean SUV that is still a long way off.

FSR’s success depends entirely on its ability to win over customers. The company must ramp up production of its SUV and plan to expand its vehicle portfolio to be a winner like TSLA in the long run.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is not favorable for FSR. However, analysts expect its EPS to grow at a rate of 10% per annum over the next five years. With nothing tangible to judge in terms of operations, FSK’s share price could witness massive swings in the coming months.

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TSLA shares were trading at $495.31 per share on Thursday afternoon, up $8.67 (+1.78%). Year-to-date, TSLA has gained 492.01%, versus a 12.22% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies.


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