Building factories, streamlining the manufacturing process, securing supply chains – there’s a lot that can go wrong for start-ups as they take a new product from the drawing board to the sales floor.
And lately we’ve seen several electric vehicle (EV) companies lower production numbers for various manufacturing-related reasons…
Lucid (NASDAQ: LUCD) cited supply chain issues when it cut its 2023 production estimates from over 20,000 cars to as few as 10,000 a couple weeks ago.
Nikola (NASDAQ: NKLA) only managed to deliver 20 in its most recent quarter, and said it would probably only make 300 trucks for the full year this year.
Lordstown (NASDAQ: LORD) had to halt production to address quality issues…
Even my favorite, Rivian (NASDAQ: RIVN), announced that it was cutting some staff and slowing the build-out of its new factory in Georgia to save cash (though cash is one reason I remain bullish on Rivian, because it has a ton of it).
Yep, the struggle is real…
Given the expense and difficulty of building out manufacturing capacity, it’s a wonder why more EV startups don’t follow the semiconductor model: design the product, but pay somebody else to build the dang thing…
That’s what Fisker (NYSE: FSR) is doing, and I think the stock is worth owning at current levels.
Coolest Car of the Year
Henrik Fisker is a design-guy. And there’s no doubt he can make a beautiful car. He designed the BMW Z8, and two Aston Martins, the DB9 and the Vantage, which the lunatics at Top Gear called the “coolest car of the year in 2005.” The Vantage has been in production ever since, and is the best selling Aston Martin of all time.
Fisker went out on his own in 2005 with Fisker Coachbuild, which was mostly a failure, though he did get hired by Tesla in 2007 for the initial design of the Tesla S.
Fisker left Tesla the same year and founded Fisker Automotive. He got the Fisker Karma into production and sold 1800 of them. Fisker won a lawsuit from Tesla that accused him of stealing Tesla designs (even the Karma was a hybrid and not all electric). Fisker Automotive went bankrupt and was sold at auction in 2014.
Fisker and his wife then started Fisker Inc in 2016. The company went public via a SPAC in October 2020.
Last week, Fisker shares ramped 30% to ~$7.50 after its fiscal 2022 annual financial report. The report wasn’t anything noteworthy. The company lost $170 million in the 4th quarter that ended December 31, worse than the $138 million it lost in the previous quarter…pretty much what you’d expect from a start-up that doesn’t have a product on the market…
The stock ramped because Fisker reiterated its forecast to build 42,000 cars this year in partnership with contract manufacturer Magna International (NYSE: MGA). And Fisker also said that pre-orders for its Ocean SUV are rising – a nice contrast to most other EV makers who are seeing order cancellations.
$0 to $371 million in Three Months
The base model of the Fisker Ocean line of SUVs is the Ocean Sport. One electric motor powers both front wheels, generates 275 horsepower and is expected to have a 250 mile range per charge.
The other two Oceans, the Ultra and the extreme, are all-wheel drive with two motors that generate 540 horsepower and will get you to 60 mph in under 4 seconds and take you 350 miles on a single charge.
And, it’s a nice looking ride…
The price looks right: the Ocean Sport is expected to fetch $39,000. The Ultra is initially priced at $51k and the Extreme will run you $71K.
Magna and Fisker are already making 100 Oceans a day. Delivery is expected to start in a month or so, after final permitting is done.
The production and sales ramp is expected to be fast. From just $30 million in revenue for Q1, Fisker is expected to post $371 million Q2 (ending in June) and $2.15 billion in total revenue for 2023.
2024 revenue is expected to just about double, to $4.12 billion.
Fisker is currently valued at $2.2 billion, roughly equivalent to expected 2023 revenue. Compared to Lucid – $26 billion market cap on expected $2 billion in revenue over the next 3 quarters – or Rivian – $15 billion market cap on expected $5 billion in revenue over the next 3 quarters – Fisker looks like a true bargain.
So you know, this recommendation for Fisker doesn’t change my views on Rivian at all. Clearly there’s room for more than one successful EV company at this stage…
Now I have to offer the standard caveat about the Fed and the economy. We shouldn’t hold any illusions that demand for all new vehicles, electric and otherwise, is already being affected by inflation and the economic outlook. And if the Fed does manage to push the U.S. economy into recession, stock prices will suffer across the board…
But recession is by no means assured. And in fact, it is the fear of recession that is keeping stocks like Fisker trading where they are. Personally, I don’t like ignoring a solid opportunity because of what may or may not happen down the road…
So, buy shares of Fisker (NYSE: FSR) under $8. It could easily be a $21 stock a year from now.
That’s it for me today, take care and I’ll talk to you on Wednesday,