The Dark Horse In The EV Race

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The U.S. government just passed legisltation that incentivizes Americans to ditch their gas guzzlers for more eco-friendly cars. 

Moreover, automakers are pushing more EV cars and phasing out gas-powered vehicles with companies like Ford (F) and General Motors (GM) expecting to go fully electric in the 2030s. 

Tesla (TSLA) has been the dominant player in the space, but competition is heating up. 

The second most searched EV stock by financial pros behind Tesla this month hasn’t even begun production.

That implies something substantial behind the wheel or another meme stock run.

The dark horse in the EV race is Fisker Inc. (FSR), is set to roll out its first SUV in November 2022. 

Is now the time to get in before the catalyst?

Fisker’s Business

Fisker Inc. (FSR) is an electric car company set to start production in November of 2022. It utilizes the Fisker Flexible Platform Agnostic Design, a process that allows the design and development of a vehicle to be adapted to any given EV platform in its specific segment. 

The company’s segments include the White space segment, the Value segment, and the Conservative premium segment.

Fisker recently announced its pre-orders for the Fisker Ocean One have sold out, 5,000 in total, with customers committing $5,000 for a reservation. Furthermore, more than 56,000 reservations have been made for the Fisker Ocean, an all-electric, zero-emissions SUV. 

Financials

FSR is a pre-revenue company, which means it has no sales yet.

However, the company believes it will begin generating revenues by either Q4 2022 or Q1 2023. 

And while it doesn’t have revenues, it hasn’t stopped institutional investors from jumping into the stock. 

During its last quarter, FSR announced it had more than $850 million in cash and cash equivalents, implying it has sufficient funds for its production launch of the Fisker Ocean. 

According to its latest quarterly results, FSR has $857 million in total cash and total debt of $688.7 million. It has a current ratio of 10.5x, implying it has more than enough liquid assets to cover its short-term debt. 

Valuation

Valuations on a pre-revenue company are somewhat meaningless as they don’t have sales.

Even the price relative to sales isn’t a good metric.

The best way to estimate the company’s worth is to assume a given market share size in the future, profitability based on competitors, and then discount that into today’s dollars.

This is a subjective process, so estimates can vary wildly.

Profitability 

Of you’re looking for an indication of gross profit margins from more mature automakers, they are Tesla (TSLA) at 27.1%, Ford (F) at 12.1%, and General Motors (GM) at 13.55%. Furthermore, competitors like TSLA have an EBITDA margin of 20.8%, F is at11.7%, and GM at 13.63%

And with Fisker aimed at a similar segment as Tesla, they’re a good point of comparison.

Growth

Growth in the space varies. 

TSLA has experienced revenue growth of 60%, F at 8.5%, and GM at -5.4%. 

FSR should experience explosive growth over the next year once its vehicles hit production. The real question is whether or not it can sustain it, not sink deeply into debt. It will be interesting to see how its EBITDA growth compares to its larger competitors, TSLA at 143%, F at 92%, and GM at -18.77%. 

Our Opinion 2/10

The auto business is extremely competitive. Established players like F and GM are trying to compete with TSLA as the EV boom is set to take off, thanks to the Inflation Reduction Act. 

Meanwhile, new players like Lucid Motors (LCID) and Rivian (RIVN) are set to start production. FSR will have a tough time competing, and because of that, we are staying away. 

Of course, things can change, especially if the Fisker Ocean gains in popularity, but it is just too risky to get involved right now.