The electric vehicle (EV) frenzy has turned conventional investing on its head. Everyone is looking for the next Tesla (NASDAQ:TSLA). And in that pursuit, we are getting some outsized valuations that often do not make sense. But where does Fisker (NYSE:FSR) stock fit into all of this?
Although there is no shortage of EV competitors, FSR stock actually stands out quite well from the pack. The company’s main product is the Ocean, an electric crossover. You might be asking yourself: what gives? It’s just another EV startup. What makes it interesting at all?
Fisker plans for the Ocean to be “the world’s most sustainable vehicle.” One of the main reasons customers are willing to pay for EVs is because they are environmentally conscious. In that vein, the car is made up of recyclable materials, such as the Dinamica fabric used for its interior. The cabin design is also minimalistic and intentional. That’s expected, considering Henrik Fisker is at the helm, famed for his luxury-car designs.
Meanwhile, the company has an asset-light model that will drive up margins and progressively reduce costs. If you want to lease or own the Ocean, you can do so through Fisker’s mobile app. Moreover, Canadian auto-supplier Magna International (NYSE:MGA) will be responsible for manufacturing the EV in Europe.
Considering all of this, the company’s market capitalization is appropriate. Even for short-term trading, FSR stock offers excellent gains if you are willing to chart it effectively.
FSR Stock and Its Advantageous, Unique Models
Fisker’s 250-mile to 300-mile range Ocean SUV will begin production in the fourth quarter of 2022. As I said before, it offers a premium, unique design that is also sustainable. The company’s mobile application will cover ordering, insuring and maintaining the vehicle. The Ocean EV model will also include a certain degree of semi-automated driving functionality.
All those things make Fisker’s EV model stand out. But at $37,499, the Ocean also has advantages in terms of price. If you decide to buy the vehicle, you will qualify for the Federal Electric Car Tax Credit (which can be as much as $7,500), potentially pushing the price down to about $30,000. But you can also lease the car, starting at $379 per month with a $2,999 down-payment.
Like I also mentioned earlier, Magna International will be responsible for the production side of things. This is not Magna’s first go-around — it has produced the Toyota Supra, Mercedes-Benz G-Class and the Jaguar I-Pace, among others. That asset-light model will help.
Magna will get warrants of up to 6% of Fisker’s equity as part of its deal with the company. Even if you don’t like the company on fundamentals, you must admit that FSR stock is doing well. Shares are up over 1o% in just the last three months. So, a potential 6% stake is undoubtedly valuable.
The one downside that could be argued when it comes to Magna, though, is about Fisker’s future — having production done entirely in-house might be better for operations in the long run.
Valuation Is Not Too Bad
Currently, Fisker has some “11,000 pre-orders worldwide” for its Ocean EV so far. In Q4 of this year, Fisker has also “added almost 3,000 reservations.” That number will only improve with time.
Granted, those numbers don’t compare in any way with Ford (NYSE:F), Toyota (NYSE:TM) or Volkswagen (OTCMKTS:VWAGY). But neither does Tesla. And you can make the same argument for the rest of the EV space. Right now, what you are looking for when investing in EVs is vision. You certainly get that with FSR stock.
Henrik Fisker is a recognized car designer. And CFO Dr. Geeta Gupta-Fisker is also a valuable corporate executive to have. She has years in both technology and finance. Despite the tall order in front of her, that professional experience should put any concerns to rest.
At a market capitalization of about $5 billion, FSR is trading at a deep discount to other EV rivals. However, Fisker is still at the pre-production stage. Therefore, this has to be a buy-and-hold investment. In the short run, the stock price will ebb and flow. But if you can stomach a bit of risk, this should be right up your alley. FSR ticks plenty of boxes.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.