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A correction in the red-hot EV space could hit FSR stock particularly hard
By Tom Taulli, InvestorPlace Writer & IPO Playbook Editor Jan 4, 2021, 8:28 am EST
It’s been a crazy ride for Fisker (NYSE:FSR) stock since the company came public via a SPAC (special purpose acquisition company) merger transaction in late October. On the first day of trading, the shares jumped by 13% to $10.14. And within a month, the price would go over $18. But since then, FSR stock has dropped to less than $15. The market capitalization is now at about $4.1 billion.
Source: Eric Broder Van Dyke / Shutterstock.com
This isn’t too shabby for a company that is more like a startup or a concept car company. Keep in mind that its EV (electric vehicle), called the Fisker Ocean, will not hit the road until the end of 2022. There is still a lot of work to be done.
So then why all the excitement? And what can we expect of FSR stock for the new year?
Let’s take a look:
The Fisker Legend: The Good and The Bad
Henrik Fisher is 57 years old and grew up in Denmark. From an early age, he was fascinated by cars and he would sketch his own designs. This interest became an obsession. So when he went to college, he got a degree in transportation in college.
From there, he became one of the world’s best designers of luxury cars. Some of his creations included the Aston Martin V8 Vantage, BMW Z8, Aston Martin DB9, and the VLF Destino V8.
Then in 2007, he would create his own car company, Fisker Automotive. He raised substantial amounts of venture capital from firms like Kleiner Perkins Caufield & Byers. The car Fisker developed was called the Karma — and it got lots of buzz because of its sleek design and next-generation technologies. Some of the high-profile customers were Leonard DiCaprio and Justin Bieber.
But there was a big problem: Fisker’s battery company went bust. While there were attempts to deal with this, they all failed. Fisker Automotive would declare bankruptcy in 2013.
Yet Fisker’s dream was far from over. He would make another run at starting an auto company. So Fisker Inc. was launched in 2016. Like the Karma, the company’s vehicle would be stylish, but the price point would be at mainstream levels: $37,499.
Here are some of the standout features:
- 250-300 miles per charge
- A vegan interior (made of recycled fishing nets and fibers from worn-out t-shirts) and solar sunroof.
- Nine glass panes that lower along with the open-air movement (the technology is patented).
Yes, it’s pretty cool. The focus on high design is certainly a smart strategy. A good analogy is Apple’s (NASDAQ:AAPL) late Steve Jobs, who was obsessed with the user experience. It turned out to be a great way to rise above the noise in the marketplace. But Jobs also built a strong infrastructure and supply chain – which is where Tim Cook came in.
So, with Fisker, will he have something similar? Well, it’s tough to tell. The outsourcing model is incredibly complex and costly for auto startups. It’s also not encouraging that Fisker had problems with this in his previous company. Then there will be the challenge of keeping the price tag low.
In the meantime, the EV space is getting intensely competitive. There are a variety of startups that have had little trouble raising huge amounts of capital.
Yet even traditional automakers like Ford (NYSE:F), GM (NYSE:GM), Toyota(NYSE:TM) and BMW are making great strides with their own EVs. These companies have the resources, distribution, engineering and design talent to take on rivals like Fisker.
Bottom Line on Fisker Stock
Again, Fisker’s Ocean is cool and the low-priced strategy is compelling. He also has the benefit of learning from his past failures.
But two years is a long time for investors to wait – and a lot can happen. Thus, when it comes to an investment, it may be better to be patient. It seems like a good bet there will be a better price.