Fisker (FSR) stock was trading sharply higher in U.S. premarket price action on Aug. 10. The stock is trading flat for the year and is outperforming other startup EV (electric vehicle) stocks. Why is Fisker stock going up and is it a good stock to buy now?
Fisker is a startup EV company. The company will start the production of its first model, the Ocean SUV, in 2022. It has partnered with Magna for the project. Unlike Tesla and Lucid Motors, which have gone for in-house production, Fisker has opted for third-party tie-ups. However, many others, including NIO, have also opted for third-party collaborations to produce their vehicles.
Fisker Ocean SUV
The Ocean SUV would have a starting price of $37,499 and a range of 250–300 miles. The vehicle can be booked by paying $250 only. For the next vehicle, which Fisker has named Project PEAR, the starting price would be $30,000. FSR has partnered with Foxconn for the project.
Why FSR stock is going up
FSR stock is going up after Morgan Stanley analyst Adam Jones issued a bullish note on the stock and assigned a bull case $90 target price. If Jonas’s prediction comes true, it would mean Fisker stock rising sixfold from these levels.
Jonas is bullish on the stock since he likes the company’s “focussed strategy” where it will look at the supply chain, design, and engineering. The production part would be handled by third parties. While in-house manufacturing can be a competitive advantage, the experience of names like Lordstown has exemplified the challenges of producing an electric car.
According to Jonas, Fisker’s partnerships “provide a path to scale and profitability.” He also sees the stock as undervalued. The company has a market cap of $4.5 billion. Lucid Motors, which went public in 2021, only has a market cap of $38 billion. However, Lucid expects to start deliveries in 2021 and also has its own production facility.
Fisker's stock forecast is bullish.
Morgan Stanley isn't the only brokerage that’s bullish on FSR stock. In 2021, several brokerages have issued bullish notes on the stock. These include Bank of America, which has a $31 target price, and Wolfe Research, which has a $30 target price on FSR stock.
Among the 11 analysts polled by CNN Business, seven rate Fisker as a buy or some equivalent, while three it as a hold. Only one analyst has a sell rating on the stock. FSR’s median target price of $24 implies an almost a 60 percent premium over the current prices.
Is FSR a good stock to buy now
Despite a flurry of EV startup companies, we are now heading into a situation where there's a scarcity premium for quality names. EV startup companies like Nikola and Lordstown have been involved in controversies and were accused of fraud. Investors have been pivoting to “cleaner” EV names like Fisker and Lucid Motors. Even Tesla stock has been going up.
While Tesla stock might appear overvalued, the company has reached a critical mass. It's sustainably profitable and has enough cash to fund the growth. Also, the Elon Musk-run company has moved up the production learning curve.
Coming back to FSR, it looks like a good EV stock to buy now. The execution risk for the company is much lower than some of its peers. The specifications of Ocean SUV look compelling and the stock could move much higher if it executes well.