Fisker Stock: Most Intriguing 2023 EV Story (NYSE:FSR)

The electric vehicle space has become one of the most covered in our markets today. Whether it is the battle to gain market share in the US or the sales surge from many Chinese players, investors are looking for the best growth stories. This year, the EV company that fascinates me the most is one that’s getting ready to start its revenue boom as it looks to make a big splash in the space. Today, I’d like to take a look at Fisker (NYSE:FSR).

Fisker was started in 2016 as founder Henrik Fisker took a second flyer in the automotive space. The company’s mission was to design innovative electric vehicles, and it went public through a SPAC back in 2020. Unlike some of the traditional players in this space, Fisker has outsourced production of its vehicles instead of building its own capital intensive facilities.

The Fisker Ocean is the latest SUV in the EV space, and it isn’t necessarily targeted at one part of the market. It’s more of a traditional SUV than the comparably priced Tesla (TSLA) Model Y, for example. The base model provides 250 miles of range for less than $37,500, while the long range models that start at almost twice that price provide 350 miles of range. Sales will start with the more expensive models at first.

The Ocean will be built in Magna Steyr’s factory in Graz, Austria, and the first units went into production back in November. The goal for this year is to produce 42,400 vehicles, with this breakdown announced at the Q3 2022 report: Q1 over 300, Q2 over 8,000, Q3 over 15,000, Q4 remainder to get to 42,400. Of course, as we’ve seen in the past with the likes of Lucid (LCID), Rivian (RIVN), and others, production ramps don’t always go smoothly. When Q4 results are reported in the next month or so, investors will be waiting to hear if there are any supply chain or other problems that could cause this year’s production plan to be reduced.

Fisker has also partnered with Foxconn (OTCPK:FXCOF) to launch its second vehicle, the Pear, in 2024. This electric vehicle will be built in Ohio, and the entry level model was originally designed to start around $30,000. We’ll see if those prices hold given the inflation problems we’ve seen in recent years. With the Ocean ramping throughout this year and the Pear supposed to hit the market next year, analysts are expecting revenue growth to explode as seen below.

At that Q3 report, Fisker detailed that it had over 62,000 net reservations and orders for the Ocean, along with more than 5,000 for the Pear. If those all convert to sales, the company should be sold out through most of 2024 assuming some more Ocean orders come in. As the graphic above shows, the company has virtually no revenue currently, but analysts think it could top $1 billion in a quarter in the first half of 2024.

The key for Fisker in the near term will be margins and cash burn. Like most startups, the company is going to be in loss territory for some time, especially until revenues finally start to materialize in a big way. The company finished Q3 with about $825 million in cash, and it had more than $200 million available under an at-the-market share sales program. If those funds are tapped, it will result in more dilution for current shareholders, but that’s obviously better than going bankrupt. We should get a full update at the Q4 report about the operating expense and capital expenditures plan for 2023, which will determine if future debt or equity raises are needed.

Fisker shares closed last Friday a little over $7 a share, about 10% above their 52-week low, well off their 52-week high of more than $16. The average price target on the street is currently $12.80, implying more than 80% upside from last week’s finish. Shares right now are trading for only about 0.53 times their expected 2024 revenue, which puts them closer to Ford (F) and General Motors (GM) which are both a little over 0.3 times, rather than a name like Tesla that goes for more than 2.5 times. If Fisker’s growth plan is mostly achieved in the coming years, even if revenues come in a notch less than current estimates, you would think the current $2.2 billion valuation seems rather low.

In the end, Fisker is the one name in the electric vehicle space I’m most intrigued about for this year. The name doesn’t have any real revenues yet, but deliveries of the Ocean SUV are expected to ramp significantly throughout 2023, with next year seeing the launch of the company’s Pear vehicle. Investors will be looking to see how margins and losses fare, and if the company needs to raise additional capital, but at the moment, the valuation doesn’t seem terrible considering the potential growth story here.