In this beginner’s guide we explore ten reasons to be bullish on Fisker shares and why a short squeeze seems inevitable.
Fisker ($FSR) is an electric vehicle stock that is heavily shorted. As the company approaches the launch date of its first vehicle on November 17, you can expect pressure to mount for a short squeeze. The nearer we come to that date, the less likely it is that the company’s plans for a successful launch and subsequent ramp-up will fall through.
If Fisker lacked a solid plan and operated like a traditional car startup, struggling to build its own products from scratch, investors might be worried about failure in this difficult market. However, Fisker has not missed a single target as it prepares to transition from pre-revenue to a formidable force in the EV sector. Now, let’s take a look at ten reasons to believe Fisker will be a runaway success in this beginner’s guide.
#1 The Fisker brand should appeal to everyone who cares about the environment, by creating the most sustainable vehicles on the planet.
Why will people choose Fisker over other electric vehicles? One reason is that Fisker is more than a car. It’s a mission everyone can get behind.
Even the name of the Fisker Ocean, to go into production on November 17 this year, suggests that the first vehicle is about a healthy respect for the natural world. The name is partly inspired by the use of plastic, rubber, and fishing nets that are recycled from the ocean to provide materials for the vegan interior. The cars are fully electric, and the solar-panel roof can add up to 28 miles per charge. They are even built at a carbon-neutral factory.
Fisker is creating the most sustainable vehicles on the planet, and one thing we can do to help the battle against climate change is to choose Fisker for its products and as a sustainable stock investment. Simply owning a Fisker Ocean is a bold statement of support for a greener environment.
#2 Fisker is building the “iPhone of automobiles” with cars that are loaded with innovative and desirable features.
Another reason why the Fisker Ocean will sell is that it is loaded with technology, like no other car. The list of innovative features, depending on trim level, is so extensive that it reads like Steve Job’s presentation at the launch of the first iPhone.
For example, there’s the solar-cell sunroof, a 17.1” touchscreen that rotates to provide entertainment while the car is charging, the all-window-down California Mode, doggy windows (38% of US households own a dog*), Fisker’s 500w 16 speaker surround sound system with subwoofer, Fisker’s Smart Traction system, and even the Fisker PowerBank that enables the car’s battery to keep your home’s lights and appliances going in the event of a power cut.
Higher trim levels include the Fisker Intelligent Pilot, a world-first digital radar system, similar to systems previously only used on military vehicles, that provides a 360-degree 3D view and can identify a space in a parking lot, distinguish objects in a dark tunnel or a dense fog, assist the front and side collision warning system, and the Park My Car feature.
Even the Ocean base model is loaded with advanced driver-assist technology to provide drowsiness warning, automatic emergency braking, speed assist, collision warning, and traffic sign recognition. All this propriety technology helps to make the car safer and more desirable, as well as distinguishing Fisker from the mainstream.
*2017-2018 U.S. Pet Ownership & Demographics Sourcebook
#3 Fisker is a car brand, headed by a designer who knows how to create vehicles that excite the senses.
Let’s be realistic, most people have never heard of him, but he’s about to become a household name. His name is Fisker, Henrik Fisker, and he’s the car designer behind two Aston Martins that have appeared in the James Bond movies, as well as the Fisker Karma and the BMW Z8. These are all exotic cars that are far from boring, that thrill the senses and speak at an emotional level.
Now Henrik is applying his design DNA to very affordable but thrilling vehicles to launch Fisker, as well as the PEAR and the Fisker Ronin supercar. Yes, design and aesthetics may be subjective, but it is clear that the Fisker name alone will add value, prestige and excitement to the business.
Talking of excitement, let’s take a look at the Fisker Ocean again. Here is a car of high style, the iconic vision of an automotive marque designer, starting at under $40,000. It would be like buying a Louis Vuitton purse for a fraction of the usual price.
From the aggressive front grill, sleek lines, and muscular bodywork to the integrated rear roof spoiler, black wheel-arch flares, and ultra-skinny lights, the car looks as though it has been designed for speed. It oozes personality, with an optimistic but determined face, doggie windows, and its wide D-column with high-level rear signals.
Compare attempts to create ever more aerodynamic ‘Jello mold’ designs by some other car companies with the Fisker Ocean. The problem is that after the initial shock of their futuristic vision, stripping away all sense of fun, spontaneity, and individuality in the process, the novelty wears off as other car makers follow. The once striking design quickly becomes the norm, and the result is blandness. This has happened throughout car evolution.
With its fun and quirky design elements, the Fisker Ocean avoids falling into the blandness trap. It is on-brand in appealing to buyers who choose to reject the dull and mundane, in favor of a car that is bold and exciting by daring to be a little different.
#4 Fisker is creating practical mass market vehicles with class-leading range and performance.
The Fisker Ocean is more than an SUV. As discussed, it’s part of a mission for a sustainable future. It’s also as spacious as a five-seater luxury sedan inside. It’s loaded with new technology. And it’s a sports car.
Delivering up to 550 horsepower and 0-60 as quickly as 3.6 seconds, the Ocean puts its combustion engine rivals to shame. Compare price and performance with the Range Rover Evoque, for example, the SUV most frequently likened to the Fisker Ocean. An Ocean Ultra will take 3.9 seconds to get to sixty. A similarly priced Evoque takes 7.0 seconds. Compared to other electric vehicles, the Fisker is ahead in terms of price, performance, and range, with over 350 miles between charging in higher trim levels—the best in its price class for an SUV or crossover.
But arguably, where it really becomes a sports car is in its Smart Traction feature, included in top trim levels and optional with the mid-trim. This Fisker developed technology automatically optimizes torque to the correct wheels to maximize performance, particularly when cornering, or in icy and wet road conditions. It helps to give the Ocean a sports car feel and roadholding like no other car on the road.
#5 Fisker is on target for 80,000 reservations, worth around four billion dollars, by the end of 2022.
Just in case you still had any doubts that Fisker isn’t about making cars that sell like hot cakes, the company is on target for 80,000 reservations of its Fisker Ocean electric SUV by the end of the year. That is without having a major marketing campaign, and without vehicles available for potential customers or auto-journalist to test drive.
Of those reservations, it has sold out of the 5,000 high-spec launch edition models that required a $5,000 non-refundable deposit. The 80,000 number also includes US pre-orders for Fisker Ocean Sport, Ultra, and Extreme. At an average selling price, including high and low trim levels, of $50,000 that is around $4 billion in potential sales.
Also, it’s worth noting the Fisker PEAR has over 4,000 reservations. It’s a car that is scheduled for production in 2024. The company hasn’t even revealed the urban mobility device to the public yet. Fisker has enough orders to see it through to 2024.
#6 Fisker’s partnership with Magna will give the Ocean world-class quality and reliability.
Fisker has forged close relationships with the biggest contract manufacturers on the planet. Let’s put that another way, the biggest contract manufacturers have chosen Fisker-designed vehicles to showcase to the rest of the world their electric car production capabilities. That shows the confidence that these industrial giants have in Henrik Fisker and his team, as well as his designs, innovations, branding, and ability to sell cars.
Magna Steyr is building the Fisker Ocean at its vast manufacturing plant in Graz, Austria. It has already produced over 3.7 million internal combustion vehicles for other customers. Borrowing Magna’s experience and expertise, gained through the assembly of more cars than Tesla and all the other electric vehicle specialist companies put together, will put Fisker ahead in terms of expertise and reliability. Magna can be expected to pull out all the stops to show that it can excel in EV production. The Fisker Ocean will be its flagship car to usher in a new era of electric car manufacturing. In many ways, it’s a true partnership, as Magna owns a six percent stake in Fisker and will obviously benefit as Fisker grows in value.
Magna is currently building cars, such as the Mercedes-Benz G-Class, the BMW 5 Series, and the Jaguar E-Pace and I-Pace, as well as having built the Aston Martin Rapide. In other words, the Fisker Ocean will share the same build quality as luxury marque brands, such as BMW and Aston Martin. Not bad for a startup company with prices starting below $40,000.
#7 A tech giant is about to take the EV market by storm (hint: it’s not Apple!) and Fisker will be riding the wave.
Foxconn, the world’s largest contract manufacturer will produce the Fisker PEAR, coming on stream in 2024. Although the car is described as revolutionary, it will share some of the parts and technologies developed for the Ocean. The car will initially be built at an existing 6.2 million square foot facility in Ohio.
Foxconn has an annual revenue of over $200 billion, and is a key manufacturing arm of other giants, such as Apple, Nintendo, and Sony. In part, to counter the slowdown in the growth of smartphones, the company is set to become a leading player in the mass production of electric vehicles.
Its EV ambitions are nothing short of stunning. It has been gearing up for a pivot towards EV manufacturing for several years, streamlining manufacturing processes and technologies, developing the use of new materials, and creating a new lightweight die-cast chassis platform that greatly reduces parts. It is even hoping to make a breakthrough with solid-state battery technology.
In March this year, Foxconn Chairman, Young Liu, confirmed that within the next couple of years, the company plans to build its own battery packs and battery cells in Taiwan, and even launch its cars and an electric bus under its own EV brand, Foxtron. The company also intends to build EV factories in Europe, India, and America by 2024.
Foxconn has set a goal of $30 billion in electric vehicle sales, or 5% of the global market by 2025. In other words, it will rapidly become one of the biggest EV players worldwide, and this is all good news for Fisker as it will be riding the Foxconn wave as a major partner.
#8 Fisker is on target to deliver more cars in its first year of production than any other EV company in history and has plans for rapid growth.
Fisker is set to deliver a minimum of 40,000 Oceans next year according to Henrik Fisker. That’s more than any other EV company in its first year of production.
Remember, it isn’t Fisker that is building the Oceans. It is Magna, which is used to ramping up production for other car companies. They are experts at the art of the ramp-up. They have done it time and time again. By contracting its manufacturing to Magna, Fisker reduces the risk of supply chain bottlenecks, logistics issues, and the risk of delays in ramping up that other small start-ups are now facing.
Look at Lucid and Rivian, for example. Both companies began production at the end of last year. Both companies took on the overwhelming task of building their own manufacturing facilities from scratch, and both companies have had to scale down their production targets for this year. Lucid now expects to deliver only 6,000-7,000 vehicles by the end of the year. Rivian is on target for 25,000 deliveries. If these companies do not iron out their ramp-up difficulties, Fisker could leapfrog them to become the number two US-based EV company next year, second only to Tesla.
Even more impressive are Fisker’s plans for 100,000 to 150,000 Oceans in 2024. In the fourth quarter of that year, the Fisker PEAR will be launched, ramping up to a minimum annual production of 250,000 units, after the first year. However, Fisker’s ambitions are even greater than that.
In May, Henrik Fisker stated that the PEAR will have three derivatives, launching in 2024, 2025, and 2026, enabling the company to sell a million PEARs a year by 2027. In terms of units sold, that would put Fisker ahead of where Tesla was last year, and we haven’t even talked about the Fisker Ronin, a supercar with a 600-mile range and 0-60 in two seconds, scheduled to go into production in 2024.
#9 Fisker is set to race from car launch to profitability quicker than any other EV company in history.
Tesla took 14 years to become profitable after the launch of its first electric vehicle. Rivian is likely to be years from profitability, raking up a projected $5.4 billion loss in 2022. Lucid losses were in excess of $1.1 billion in the first half of 2022. In contrast, Fisker could be profitable by 2024, just two years after it launches its first vehicle, the Ocean.
But how do we calculate Fisker’s potential profitability? Well, Fisker expects to sell 150,000 Oceans in 2024. Let’s say the average selling price will be $50,000 per unit, including optional extras. That will generate $7.5 billion of revenue.
In a July 2020 investor presentation, Fisker’s gross profit was projected to be around 17-21% for an Ocean Sport and 28-33% for an Ocean Extreme. Those percentages are the difference between what Fisker pays its contract manufacturer and the price at which the cars sell to the public. However, the figures were based on an expectation that VW would be building the cars.
Assuming those margins hold true with Magna, Fisker would be looking at a margin of around 20%, or a gross profit of $1.5 billion in 2024 to spend on things like customer care, research and development, marketing, experience centers, and capital expenditure to launch the PEAR and possibly the Ronin. As long as Fisker keeps its spending under control that would be sufficient funding to service all of its obligations and even put it in profit.
Fisker also needs to maintain a healthy cashflow until it achieves profitability. Of course, as soon as it starts deliveries of the Ocean, it will begin seeing revenue, but it will also need to raise cash in the short-term next year. This is quite normal for a start-up. The issue was addressed at the Q2 earnings call in July, in which it was stated that the company is exploring options other than dilution.
Inflation is of course another factor to consider, as it is for all EV companies, but the assumption of an average price of $50,000 is a conservative estimate, and the current exchange rate with the Euro will also give Fisker a cash bonus for units sold in USA.
The quick transition to profitability is another way in which the asset-light business model delivers advantages to Fisker not seen by its rivals. By contracting its manufacturing to leading world-class manufacturers, Fisker does not need to spend billions on building manufacturing plants, infrastructure, factory employees, and training. Supply chains and economies of scale have already been established. Risk of failure is greatly reduced, and the path to profitability is much faster.
This business model is proven to work. It is the same model used by Apple, the biggest company on the planet. Apple does not have a single manufacturing plant. All of its products are built by third-party contractors, in particular Foxconn, allowing it to focus on customer care, research and development, and marketing. Sounds familiar? Its profits last year were $100 billion. Don’t listen to those who complain that Fisker doesn’t have any factories.
#10 Fisker’s market capitalization pales in comparison to other EV companies.
This is where things get interesting. Remember the difficulties that Lucid and Rivian are having? The billions in losses and the slow ramp-ups? If Fisker doesn’t have any unforeseen challenges, the company could leapfrog both Lucid and Rivian in terms of vehicles delivered, revenue, and in reaching profitability. Fisker could do all three within the next two years.
Take a look at their market capitalization and compare them to Fisker. At the time of writing, Fisker is valued at approximately $2.4 billion, based on approximately $8/share. Lucid is valued at nearly 10 times that amount, and Rivian at around 12 times.
This tells us that if Fisker, with expected production of at least 40,000 units next year, were to reach parity with the market capitalization of where Lucid and Rivian are now, Fisker stock price could be valued much higher than it is today. Where will Fisker’s stock price be then? We will leave you to crunch the numbers.
This guest article is written by Trevor Lewis, an EV enthusiast and Fisker ($FSR) shareholder.
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