My initial reaction to this question is to go with the former rather than the latter. In part, it’s because I called Fisker (NYSE:FSR) stock a buy at $15 in early April.
Mobile phone with company logo of US electric vehicle manufacturer Fisker Inc. on screen in front of webpage
Source: T. Schneider / Shutterstock.com
Since then, FSR stock has proceeded to blow through that bogey all the way down near $12 before rebounding in recent days. It’s trading around $13.50 today.
Now I’m just as confused as everyone else following Fisker.vTo make matters worse, I recently discussed why Lucid Motors — soon expected to merge with Churchill Capital Corp IV (NYSE:CCIV) — couldn’t hold a candle to Tesla (NASDAQ:TSLA).
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If Lucid’s not worth $33 billion at this stage of its development, I’m left wondering about Fisker’s true value.
Big bargain? Falling knife? The truth is Fisker’s a little of both. Here’s why.
FSR Stock Is a Major Bargain
According to Fisker’s 10-K, the company had 157.7 million Class A shares outstanding as of March 22 and 132.4 million Class B for a total of 290.1 million outstanding. Based on a share price of $13.83 as I write this, it’s got a market capitalization of $4.0 billion or about one-eighth the value of Lucid.
According to the eight analysts providing a revenue estimate for 2022, Fisker should generate $355 million in sales. As I said in my April 27 article about Lucid, its sales projection for 2022 is $2.2 billion.
At the moment, these two numbers are nothing but estimates. Neither has produced any revenue to speak of and won’t until later in 2021 or into 2022.
So, for those who haven’t read my article, the $33 billion market cap for Lucid is based on 1.6 billion shares outstanding and a share price of approximately $20.63. CCIV has since gained a couple more dollars, so the valuation keeps moving higher.
InvestorPlace’s Luke Lango recently discussed the rumors of a Lucid tie-up with Apple (NASDAQ:AAPL). He believes Lucid could be the next Tesla. Personally, I thought that title had already been awarded to Nio (NYSE:NIO). However, if you want to learn more about the possibilities on this front, I suggest you take a look at his commentary.
I’m not going to lie. Even the sniff of an Apple partnership is going to light a fire under any stock. So, it’s understandable why CCIV has been moving higher.
But a $37 billion market cap? Let’s get a grip.
According to page 33 of Fisker’s latest presentation, it projects an annual volume between 200,000 and 250,000 units by 2025. At a $50K selling price, that’s $12.5 billion in revenue at the high-end of the projection.
Lucid expects to deliver 251,000 vehicles in 2026 at an average selling price of almost $91,000 for $22.8 billion in revenue.
Assuming both hit their targets (which ain’t gonna happen) Fisker’s 2025 forward price-to-sales ratio is 0.32x compared to 1.6x sales for Lucid. Fisker currently has a multiple one-fifth Lucid.
Apple or not, the $50,o00 car has a better shot at hitting the target than a $91,000 version.
Fisker Could Be Single Digits Soon Enough
One of my favorite InvestorPlace contributors when it comes to technology write-ups is Dana Blankenhorn. He’s spent years covering the tech sector and usually has a zinger or two that really cuts to the heart of the matter.
He recently discussed why an investment in Fisker at this point is real speculation. He compared Fisker to Preston Tucker and the failed Tucker automobile. I did like the movie about the dreamer. That Jeff Bridges sure can act. But I digress.
“I’ve compared Fisker with Preston Tucker, whose company failed. (At least Tucker got a good movie out of it, directed by Francis Ford Coppola, whose wine company succeeded),” Blankenhornwrote on April 26.
“This was a little unfair. Tucker was selling dreams into a mature market. Henrik Fisker has been selling real designs into a new market.”
The reality is that Henrik Fisker has already failed once in his attempt to bring an electric vehicle to market, something my colleague mentions in his article. So, it’s not surprising there is some cynicism from analysts about Fisker’s asset-light, design-heavy business model.
I believe that he learned a thing or two from his 2007 failure and that will hold him in good stead as he brings the Fisker Ocean SUV to market.
But as Blankenhorn rightly states, the risk of losing 100% of your Fisker investment is real. It might be wise to wait things out with the stock down 16% over the past month and 57% since its February highs.
The Bottom Line
I have to admit that I’m rooting for Henrik Fisker and the Fisker Ocean. I’m hopeful that Foxconn will come through and actually build electric vehicles in America. The more, the merrier, in my opinion.
In my last article about Fisker in early April, I argued that if you could buy around $15, the risk/reward started to work in your favor. Trading below $14 at the moment, I view the risks of owning Fisker to be less than that of Lucid.
Sure, Lucid has an impressive management team, but it still has to execute. If you’re a speculative investor, I don’t think there’s any question FSR stock is a better buy.
I view Fisker as a big bargain. Time will tell if I’m right.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
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