Here’s Why Fisker Is a Sell Following Earnings

Stocks to sell

Fisker (NYSE:FSR), an electric vehicle (EV) maker that wants to create the most sustainable cars in the world, recently reported its first-quarter 2022 financial results. It also provided updates on its production plans. Now, investors may be wondering if FSR stock is a buy. I argue it is not for the following reasons.

First, Fisker reported a first-quarter loss of 41 cents, which was wider than the 39-cent loss analysts were expecting. To put this in perspective, the company has a mixed record of both beating and missing earnings per share (EPS) estimates. From Q4 2020 to Q2 2021, the company beat EPS forecasts. But as of Q3 2021, this has switched to a trend of missing the mark.

In its most-recent results, Fisker reported a net loss of $122.1 million and an operating loss of $123.5 million. That’s compared to a net loss of $176.8 million and an operating loss of $33.1 million in Q1 2021.

The total operating costs and expenses increased to $123.5 million in Q1 2022 versus $33.1 million in Q1 2021. We should expect these costs to increase as Fisker gets closer to the production of its all-electric Ocean SUV, expected to begin in November.

Another factor that should worry investors is Fisker’s statement on inflationary and commodity-cost pressures. The firm said for time being, it does not expect to raise prices, but that could change in 2024 after it has produced the 40,000 cars currently reserved.

This practically translates into lower-than-expected profit margins for the first 40,000 cars made, which is not good news. EV makers are scrutinized on the results they deliver rather than promises — and in 2022, it’s especially true that the valuation of equities is of paramount importance.

On a positive note, Fisker reported the number of Ocean model reservations increased to more than 45,000 as of May 2. That’s compared to 31,000 as of Q4 2021.

It is also making progress on the development of the Pear model and has announced a third vehicle named “Project Ronin.” This vehicle is an all-electric sport Grand Tourer, which is expected to deliver both high performance and an outstanding range.

However, I am not bullish on this news. Fisker should should be prioritizing its Ocean model, supply chain worries and trying to make a profit rather than just expanding its model range. I consider FSR stock too risky when it has yet to pass the test on production of its first vehicle.

On the date of publication, Stavros Georgiadis, CFA  did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.

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