Arguably the most compelling company among electric vehicle dark horses, this status alone didn’t save Fisker (NYSE:FSR) from a severe dose of volatility.
Although shares are still up for the year, FSR stock took a beating relative to its peak price, down over 42%. After such a promising start, is it time to worry?
For those who bought near the highs, I can understand the hesitation. Not helping matters is that the EV sector itself is under pressure. On a year-to-date basis, Tesla (NASDAQ:TSLA) shares are down 5.23%. Chinese competitor Nio (NYSE:NIO) shed 26.5% over the same timeframe. Of course, the difference here is that these two companies have a production track record.
On the other hand, Fisker is what you would call a pre-revenue company, or euphemism for the company isn’t making any money. In my opinion, some investments like FSR stock make for smart speculation, even without the hard numbers to show for it.
The potential for EV growth is massive. Once the revenues start rolling in, Fisker could be considered a discount at today’s price.
Nevertheless, the idea that Fisker will generate revenue is hardly a given. While you can argue that TSLA is overvalued on paper, you can’t quite make the same argument for FSR stock. Again, Fisker makes zero revenue: a multiple of zero is always zero.
Moreover, I believe the Texas winter storm had a consumer-level impact on sentiment for all EV companies. As you know, the tragic weather event produced some howlers in terms of misplaced blame. But repeat a lie often enough and some of it is bound to stick.
Regarding EVs, the blame game had an important kernel of truth: EVs depend on the grid. When that grid goes down, you ain’t going anywhere.
FSR Stock Slots Into a Pricing Sweet Spot
While the consumer impact of the Texas cold snap was a sharp lesson regarding how far we need to go to make alternative energy a viably comprehensive solution, you can make the argument that it’s a temporary one.
For instance, people were scared to fly following the 9/11 attacks. Eventually, though, people returned to the air. Presumably, the same will occur with the present health crisis. Therefore, the vulnerability of the grid will likely not be a permanent deterrent to FSR stock.
Regarding its pre-revenue status, that’s an admittedly much larger hurdle to jump. However, if the company’s Fisker Ocean SUV can hit the showroom floor at or close to its $37,499 target, the needle can definitely swing in favor of FSR stock.
First, no one is offering an electric SUV of this caliber at this price point. For context, the cheapest EV by a major manufacturer is the 2020 Mini Cooper SE, which comes in just under $30,000. The Tesla Model 3 is priced the same as the Ocean but the former is a sedan, a platform that’s shedding popularity with American drivers.
About the closest thing you can get to an Ocean right now is the Hyundai Kona Electric. Granted, the Kona is well received by automotive journalists for its everyday practicality, but its performance is rather pedestrian. Moreover, its looks are typical Hyundai: safe, conservative, non-offensive.
But that’s the problem with many EVs – you need a little pizzazz to stick out from an increasingly competitive field. And that brings me to my second point: the Fisker Ocean is a gorgeous piece of automotive artwork.
While beauty is in the eye of the beholder, there’s some objectivity to this assessment. Fisker’s founder, Henrik Fisker, is an automotive design genius, having spearheaded multiple iconic cars.
From a consumer’s standpoint, you’re getting a high-performance electric SUV with design cues from Jaguar and Land Rover. Arguably for most consumers, that’s $37,499 well spent.
Worth a Shot for the Gambler
Before you jump aboard FSR stock, you should know that while Fisker’s potential is exciting, it’s still an aspirational investment. A lot can happen between now and when that first Ocean rolls off the production floor.
Mainly, if the production cost pushes the proposed price tag of the Ocean far beyond what was disclosed, that could be a deal-breaker. Also, there’s no guarantee that the SUV will even reach production, which of course will kill FSR stock.
Still, I’m willing to bet that Fisker the man has learned valuable lessons from his first failed foray into the automotive market. If you’ve got some speculation funds lying around, this isn’t a bad place to put it.
On the date of publication, Josh Enomoto held a long position in FSR and a short position in TSLA.
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.