I am neutral on Fisker (FSR), as its strong growth potential is offset by the fact that it is at least several years away from profitability.

Fisker, a U.S.-based EV manufacturer company was founded in 2005 by Henrik Fisker.

Fisker Karma is a luxurious electric sports sedan. Fisker Ocean is a sustainable, all-electric vehicle made of vegan and recycled materials. (See Fisker stock charts on TipRanks)

Strengths

In June, Fisker signed a manufacturing agreement with Magna International (NYSE:), which will be making the Fisker Ocean.

Fisker Ocean, an electric sports car that will make its debut in Los Angeles on November 20,21, is expected to begin full production in November 2022.

Nearly 17,500 customers have reserved Oceans for $250, indicating that there is significant interest from the public, even though the company has not yet sold an electric vehicle.

Recent Results

Fisker announced operating results for the second quarter of 2021 consistent with the company’s expectations, and reported a cash balance of $962 million as of June 30. At the moment, there are no profits for Fisker and its quarterly net loss was $46.2million ($0.16 per share).

Fisker has also made an agreement with Foxconn in Taiwan to assist it in designing and producing two vehicles. Project PEAR is a personal electric automotive revolution that is more affordable than the Ocean. Fisker plans to produce four more vehicles before 2025.

Fisker is also a partner with the two EV-charging infrastructure companies Electrify America (USA) and Allego (Europe).

The Ocean’s unveiling in November 2022 will face many challenges. Fisker has yet to demonstrate it can deliver on this asset-light model, and any road bumps can adversely affect the company’s ability to deliver its EV models on time.

The Ocean has a lot of consumer interest. If the company can successfully market the model and then maintain production to satisfy demand, it is possible to achieve near-term profitability.

Valuation Metrics

Fisker stock looks quite expensive given that it is still quite a ways away from delivering a profit to shareholders. Shares currently trade at 1,556x revenue on a 12-month trailing basis. However, this figure should drop significantly once the company starts selling cars.

The stock is still highly speculated, as the company expects to post an EBITDA loss in the range of $270.4million in 2021 and more than $336.3million in 2022.

Wall Street’s Take

From Wall Street analysts, Fisker earns a Moderate Buy analyst consensus based on four Buy ratings, two Hold ratings, and zero Sell ratings assigned in the past three months. The upside potential of Fisker is 37.4%, according to the $20.33 average Fisker target price.

Bottom Line

Fisker enjoys significant customer interest in its products, and has secured high-profile production partnerships in Magna International and Foxconn.

Fisker’s sector is growing rapidly, and it has wisely targeted niches within this space to keep up with the fierce competition of larger corporations. Wall Street remains bullish at the current stock prices.

However, Wall Street is generally bullish on the stock at current prices. The company has been suffering severe losses and is unlikely to make any significant profits for many years.

Disclosure: Samuel Smith didn’t hold any positions in the securities discussed in this article at the time it was published.

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