Significant Potential for EV Startup Fisker Inc
Electric vehicle (EV) stocks have experienced severe price deterioration this year. The selling has been broad, ranging from startups to major EV stocks. It’s clear the buying over the last few years was excessive. Many EV stocks surged to excessive levels but have since corrected by as much as 90%.
On the smaller end of EV stocks is the high-risk/reward play Fisker Inc (NYSE:FSR). The EV maker was one of a handful of EV startups that debuted in early 2021.
My view is that EV stocks will provide significant opportunities over the next decade or so. Whether it’s legacy auto companies or pure-play EV makers, the spending on building up the EV industry has been massive.
Grand View Research, Inc. is extremely bullish on the EV sector, estimating that the North American EV market will expand at a compound annual growth rate (CAGR) of 37.2% to $147.6 billion by 2028. (Source: “North America Electric Vehicles Market,” Grand View Research, Inc., last accessed November 15, 2022.)
Fisker Inc is in its early stages, but its financial growth is expected to be significant. Of course, there’s a great deal of uncertainty with startups, but if Fisker delivers as expected, the returns could be massive for investors who are willing to risk some capital.
FSR stock surged to $31.96 in March 2021 despite the company not having sold a single vehicle and having zero revenue. Fisker stock had a market valuation of $9.6 billion back then.
FSR stock is down by 75% from its high, but the company has finally begun sending vehicles down the production line.
Fisker Inc’s Revenues Set to Spike
In 2021, Fisker produced a mere $106,210 in revenues, which equated to $197.97 per employee. And that’s from a company with a market valuation of $2.5 billion.
Clearly, something was out of place, so the subsequent price deterioration of Fisker stock was expected.
Wall Street expects Fisker Inc to report revenues of $970,000 for full-year 2022 before delivering $2.0 billion in revenues in 2023. Analysts have a high estimate of $2.6 billion for 2023. (Source: “Fisker Inc. (FSR),” Yahoo! Finance, last accessed November 15, 2022.)
Based on analysts’ current estimates, Fisker Inc is attractive, trading at 0.95 times its 2023 consensus revenue estimate.
Compelling Risk/Reward Trade-Off With FSR Stock
Fisker Inc’s stock chart below shows the stock steadily moving lower after setting its March 2021 high.
In the aftermath, Fisker stock had several downside breakdowns, including multiple bearish death cross patterns. This type of pattern occurs when the 50-day moving average (MA) breaks below the 200-day MA. FSR stock was trading around $15.00 when the last death cross emerged.
The degree of the selling could mean Fisker stock is an aggressive contrarian opportunity. FSR stock has decent buying around $8.00, a level below which it currently sits.
Chart courtesy of StockCharts.com
We need to see Fisker stock hold. A sustained bounce could drive shares of Fisker Inc toward their 200-day MA at $9.82. A major move could see FSR stock recover to its first Fibonacci retracement price of $16.42, followed by $19.59.
Given that Fisker stock is down by 75% from its high, I like its potential as Fisker Inc begins to significantly grow its revenues.
Watch for short-covering support. As of October 13, FSR stock had 51.8 million shorted shares, or 31.8% of its float. A rally would drive the short traders to cover, lifting the price of the stock. (Source: Yahoo! Finance, op. cit.)
Fisker Inc is compelling for contrarian risk traders who are seeking a high-risk/reward opportunity.