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This has been a tumultuous year for startup electric vehicle (EV) companies, and most are struggling with selling cars - while some, like Lordstown Motors (RIDEQ), simply went out of business. Multiple EV stocks, including Rivian (RIVN), Lucid Motors (LCID), Nikola (NKLA), and Fisker (FSR), have all fallen to record lows at various points this year.
While most of these names have moved off their lows, Fisker hit a new low of $1.76 just earlier today. The recent slide in FSR is more of a company-specific issue, beyond the broad-based sell-off in startup EV names that we’ve seen over the year. Here’s why Fisker stock is dropping, and whether you should buy or sell the stock near its record lows.
Why Is Fisker Stock Dropping?
There are a few key reasons why Fisker stock is dropping, and has lost over 60% of its value within the last month.
- Departure of key personnel: Over the last month, Fisker has seen the departure of one chief technology officer and two chief accounting officers. The latter is especially worrisome, as Florus Beuting - who succeeded John Finnucan as CAO - resigned in less than a month.
- Delay in Q3 earnings and 10Q filing: The departure of CAOs in quick succession is rarely good news for a company, no matter how much it is made about “personal issues.” To make the situation worse, Fisker also delayed its Q3 earnings and 10Q filing, citing the “identification of material weaknesses in internal controls.”
- Fisker ultimately reported a wider-than-expected loss for the third quarter, while also slashing its 2023 production guidance to between 13,000-17,000 units. The company joined ranks with other startup EV companies like Polestar (PSNY) and Lucid Motors that also cut their 2023 production guidance.
While most startup EV companies are struggling with weak demand, and some still face supply-side bottlenecks, Fisker attributed its weak results to delivery and service infrastructure issues that have negatively impacted its ability to ship cars to customers.
Fisker’s Production Strategy
Fisker’s logistics problem is due to its production strategy. For its Ocean SUV, it has partnered with automotive supplier Magna - which also produces cars for Mercedes-Benz and BMW and has built a reputation for its quality. However, Fisker has faced issues shipping these vehicles from Austria to other markets in Europe and the U.S.
For its upcoming models – Pear and Alaska – Fisker is looking to partner with Foxconn. Notably, while Foxconn is best known for producing most of Apple’s (AAPL) iPhones, it has also forayed into EV contract manufacturing. The company bought the Lordstown production facility from Lordstown Motors and also formed a joint venture with Saudi Arabia to produce EVs in the oil-rich kingdom.
FSR Stock Forecast: Analysts Turn Bearish
This month, several analysts have lowered their target price on Fisker stock, as Wall Street grows wary of the startup EV company. These include former Fisker bull John Murphy of BofA Securities, who has put his rating on the stock “under review.”
Overall, analysts have a consensus rating of “Hold” on Fisker. Four analysts rate it as a “Strong Buy,” 2 as a “Hold,” and the remaining 3 rate it as a “Strong Sell.” Meanwhile, amid the recent price collapse, Fisker trades considerably below its most pessimistic target price of $3.00 - while the mean target price of $6.69 is a premium of 271% to current prices.
Is Fisker Stock a Buy or a Sell?
Fisker does not have the strongest balance sheet in the startup EV space, and had $625 million as cash and restricted cash at the end of September. It raised $150 million in Q3 - and while its cash needs are not as high as companies that are producing cars at their facility, it might still need to do more rounds of capital raises.
Here are the other factors that investors need to consider before buying FSR:
- Fisker has a reasonable product proposition with an extreme focus on sustainability, which might find resonance with a section of the market. It also offers solar roof charging, which it says can deliver up to 1,500 miles of driving range every year.
- Fisker’s first model has received decent reviews from auto analysts, with MotorTrend terming Ocean as “a nice job for a first-iteration product from a startup,” even as it admitted to “a few bugs that still need to be worked out.” While the review might not be on par with the raves that Lucid or Rivian models received, it is nonetheless much better than some of the other players, like VinFast (VFS).
- Fisker's vehicles also offer a good range in their class, and if its upcoming base Ocean Sport model – which it is looking to sell at around $40,000 – can gain traction, the company could see better days ahead. The company's cars currently don't qualify for the $7,500 EV tax credit in the U.S., but if it can partner with Foxconn to produce upcoming models in the country, they would be eligible.
All of that said, the EV churn will likely intensify in the months ahead, and many startup EV companies - especially those with “me-too” product propositions and weak balance sheets - might simply fade into oblivion.
As for Fisker, while it might not be in the same league as names like Rivian, which has a much stronger product portfolio and billions of dollars of cash on the balance sheet, it nonetheless looks better off than those startup EV companies that look on the brink of collapse.
The recent CAO changes and admission of weakness in its internal financial controls do add another layer of risk for FSR investors. However, after the sell-off, I believe Fisker stock could be a decent bet for risk-tolerant investors. As for risk-averse investors, the entire EV pack is currently on shaky ground amid the price war, rising competition, and macroeconomic weakness.
On the date of publication, Mohit Oberoi had a position in: AAPL , RIVN . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
