Fisker (NYSE:FSR) is one of the hottest stocks in the red-hot electric vehicle (EV) sector. If you were an investor when the stock began publicly trading, you’ve seen the value of your investment nearly double (as of this writing).
Too far too fast? That remains to be seen. However, at some point Fisker will have to turn an ambitious vision into bankable revenue. A new occupant at 1600 Pennsylvania Avenue should help.
Never doubt the power of a presidential election to juice a market sector. The EV market was growing under the Trump administration. But it was doing so under what I called “benign neglect.” I never got the sense that President Trump disliked EVs. They just didn’t fit his agenda.
Would they have been an afterthought in a Trump 2.0? Perhaps. But there’s no doubt that investors are preparing for massive government stimulus from the Biden administration. I just received an email this morning with these breathless words:
For starters, the EV revolution is about to hit full speed.
Today, there are well over 100 electric vehicle models being developed.
The world’s largest auto companies are pouring more than $300 billion into their EV lines over the next few years.
And in those words presents the opportunity and the reality check for Fisker.
FSR Stock: One of Many Or One-Of-A-Kind?
The excitement around Fisker stems from its founder and design visionary Henrik Fisker. The company’s electric SUV will be made, in part, out of recycled materials from the ocean that will add to its eco-friendly chops. In fact, Fisker is proposing a full-length solar roof option.
I’ll give the company points for carving out a unique position in a crowded field. But I’m not sure if that will be enough for the company to stand out.
In many articles I read on the subject, Fisker is seen as a visionary company much like Tesla (NASDAQ:TSLA) and, more recently, Nio (NYSE:NIO).
However, Tesla shares are trading at the level of many of the FAANG stocks for a reason. Many of the early adopters of Tesla view the company as a technology company first. The electric vehicle is a byproduct of a larger vision. And feeding into that is the company’s founder, Elon Musk. If you’re bullish on Tesla, it’s not because you view Tesla as a pure-play EV stock.
Nio was a company on the verge of bankruptcy earlier this year. However, since the company got an infusion of cash from the Chinese government, it appears that the sky is the limit even if American consumers may not be able to see that horizon.
Which brings me back to Fisker. With Fisker, investors are buying into a pure-play EV stock. Yes, the car may be made from some sustainable materials. But as I noted in a previous article, Fisker is outsourcing the manufacturing of the Ocean. That should make investors at least question how much of Fisker’s sustainable design will make it off the drawing board.
The Pre-Order Illusion
Like other startup EV companies, Fisker is accepting pre-orders for the Ocean. The pre-orders come with a $250 deposit. This brings revenue through the door. But as with Electrameccanica Vehicles (NASDAQ:SOLO), the deposit for the Ocean is not binding. And according to one online thread I saw, it’s 90% refundable.
I understand that when you’re not going to be selling cars, you have to be able to point investors to something. I just think this is little more than an accounting sleight of hand. A potential sale is not the same as an actual sale.
What Should You Make of Fisker Stock?
Whenever I have to write about a stock like this, I don’t rely on my own instincts. David Moadel advises against taking too large of a position. I like that advice. Ian Bezek sees an opportunity for profit taking. I could be down with that as well.
My general sense of the EV sector is that a lot of companies have gone the SPAC route for a reason. They only had to convince one whale of their concept. Does this mean that all of them will fail? Of course not. But several will. And it’s way too early for me to know if Fisker will be one of them.
The Ocean may turn out to be a gorgeous set of wheels. But ultimately, it’s going to be one EV among many. And it won’t be here until 2022. I need to see more.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.