Pros Top Stocks They Expect to go Bankrupt

There isn’t always one thing that puts a company on the pathway to bankruptcy.

For new businesses, it’s a failure to generate cash from operations.

For established companies like Bed Bath and Beyond, it’s a steady decline in sales ultimately leading to its demise.

But if you want to know which stocks to avoid, there’s no one better to follow than the financial pros.

And amongst their top five potential bankruptcy plays, Fisker (FSK) is top of the list.

Once hailed as the titan to take on Tesla, the company’s stock trades at less than $0.50 per share.

After the latest earnings call, a lot of money managers believe the company won’t exist in the near future.

From hype to trash heap, here’s why Fisker topped the list of stocks likely to go belly up.

Fisker’s Business

Electric vehicles were all the rage in the post-pandemic era…

…that is until 2024.

From Ford to Tesla, demand for the technology dried up.

And that left Fisker, a premium EV manufacturer, in a pickle.

The company produced 10,142 Ocean SUV vehicles in 2023, less than a quarter of its original goal of 42,000.

There wasn’t one specific reason they failed, but a death from a thousand cuts.

Eight months ago, Fisker said it had 65,000 reservations for its Ocean SUV.

Since it’s produced less than a sixth of that demand, the list should still be long.

However, the company’s site shows custom-built vehicle deliveries estimated delivery in three months or less.

Source: Fisker Website

It’s left analysts scratching their heads, wondering whether the reservations even existed in the first place.

Financials

Source: Stock Analysis

Fisker’s financials are a hot mess.

The company has $326k in cash on hand with $539k of inventory.

Yet, it holds $1.2 billion in debt and burns through roughly $300 million every quarter.

In fact, the company didn’t even bother submitting a statement of cash flows in its last filing, while also giving notice it’s annual report would be submitted late.

Valuation

Source: Seeking Alpha

As you can probably imagine, companies on the verge of bankruptcy aren’t profitable.

Walgreens (WBA) might look like a great deal. But most analysts believe it’s a value trap in a death spiral.

Two of the other companies are in the EV space, while Spirit Airlines (SAVE) just had its merger with Jetblue blocked.

Notably, Fisker’s price-to-sales, a metric used for unprofitable growth companies, is well below 1.0x.

This signals investors don’t believe the company’s sales are sustainable.

Growth

Source: Seeking Alpha

Now, Fisker’s revenue growth looks incredible. But remember, it started from basically zero.

And next year’s growth is a very big question market.

Other companies on this list have growth ranging from a few percentage points to over 100%.

Yet none expect profits to improve next year, except for Spirit’s EBITDA.

Profitability

Source: Seeking Alpha

Fisker’s gross profit margin isn’t the worst. But it reclaims the mantle with its awful EBIT and net income margin.

While it doesn’t burn through the $1.1 billion in cash annually that Plug Power (PLUG) does, it’s got so little cash on its balance sheet it would be a feat for it to make it through 2024.

Our Opinion 0/10

Fame can only carry a stock so far.

Fisker might have been the darling of the EV boom. But its ability to turn that into a real business fell flat.

The company’s equity may be dirt cheap. But we’d be surprised if it doesn’t declare bankruptcy within the next 6-12 months.

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