Will EVs Ever Rebound? Fisker (FSR) Stock Prediction

Will EVs Ever Rebound? Fisker (FSR) Stock Prediction

Although Fisker (NYSE: FSR) was among the first electric vehicle ("EV") start-ups to go public via a SPAC merger last year, its manufacturing timetable still lags behind that of its competitors. Fisker restated its dedication to starting production of its flagship all-electric SUV, the Fisker Ocean, on November 17th, 2022, during its results call for the second quarter on Thursday. The EV start-up has been quiet as usual on the technology and specifications for each trim level of the car, keeping it for the big reveal at the forthcoming LA Auto Show in November, save from reiterating that the Ocean program is "on schedule and budget."

The Fisker Ocean has more than 17,500 bookings without having yet allocated any funds to marketing. The number of Fisker Ocean bookings obtained suggests strong public interest in the car, considering that no information about its performance specs or pricing alternatives has yet been revealed. Each reservation costs $250 and is only 90% refundable if canceled. Further demonstrating Fisker's dominance in the market, the company's flagship SUV has also won fleet orders from Credit Agricole Consumer Finance, Onto vehicle subscription services, and Viggo ride-hailing services. After the highly anticipated release of the Fisker Ocean, a complete marketing campaign rollout will start in November. The automaker hopes to get at least 25,000 reservations by the end of the year and another 50,000 in 2022 to guarantee a sell-out in 2023, its first full year of production.

Three different cars, including the previously mentioned PEAR program, a sub-$30,000 new-segment EV jointly developed with Foxconn, are also scheduled for release by the firm before 2025. The following two vehicles are expected to go into production in 2024 and 2025, respectively, with the PEAR program set to begin production in Q4 of 2023. Fisker, which strives to be the world's most environmentally friendly and sustainable automaker, benefits significantly from the recent flurry of updates to emissions standards and funding allocations announced by the US government and European Commission. Fisker prioritizes rollout in the two markets as part of its go-to-market strategy.

Fisker has the tools and resources necessary for a successful launch of its entire vehicle lineup by 2025 thanks to its distinctive asset-lite business model, which is developing according to schedule thanks to production partnerships established with world-renowned manufacturers, Magna and Foxconn, and strategic investments into supply chain components, including Allego charging infrastructure in Europe. The automaker is well-positioned for profit realization to begin in 2023 and operational cash flows to become self-sufficient by 2025.

The current price position presents a decent purchase opportunity, especially given that the share price has recently mainly stayed range bound at the $14–$15 level as investors see the forthcoming November introduction of the Fisker Ocean as a trigger. Based on the business plan Fisker has disclosed and its associated growth outlook, we have set a 12-month price target of $20.61 for the stock. However, as it gets closer to ramping up total production on all four of its vehicles by 2025 and accelerated global EV adoption anticipated through the end of the decade, this price target could easily double over time.

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Although management has kept quiet about the details of its flagship SUV, its detailed five-year business plan to become the world's most sustainable automaker includes a product lineup of four all-electric cars, a portfolio of strategic alliances, and becoming climate neutral without using offset credits—remains unmistakable.

The Fisker Ocean has advanced from the designing and prototype phase to the testing phase since we last reported on the company two months ago, slowly making its way toward the commencement of production, which is just over 15 months away. Following the Leaders Summit on Climate in April and the G20 Climate and Energy Meeting last month, government intervention in accelerating global EV adoption has also become more prominent in the previous two months, further enhancing Fisker's long list of competitive advantages over its industry competitors.

The Fisker Ocean and the Launch of the Global Brand

Being "on schedule and budget" with planned initiatives is one of the most critical needs for a successful start-up, and the Ocean program is providing this. Budgeted at less than $1 billion, the Ocean initiative will be wholly supported by the revenues from the business's SPAC merger last year.

Only 15 months remain until the Fisker Ocean goes into production. Yet, the company's financial sheet still shows a cash balance of more than $962 million, demonstrating extraordinary strength in its capacity to manage costs. Its asset-lite business model and adaptable "FF-PAD" (Fisker Flexible Platform Agnostic Design) production strategy have allowed the automaker to source components at competitive traditional OEM pricing with "milestone- and deliverable-based" payment terms, meaning no need to pay a sizable upfront deposit, are all to thank for the ability to conserve cash early in the entire development and production process.

The Fisker Ocean's testing will take precedence until the commencement of production early in 2019. This contrasts with the original intention to outsource the procedure to a third party. The strategic choice was taken in response to modifications to the Euro NCAP and IIHS safety requirements, which have increased the rigor and depth of the testing procedure. To account for the need for more staff members and extra testing and validation procedures, management has changed its outlook on Capex expenditure for the year up by $40 million at the midpoint from the prior range of $490 million to $530 million. However, the actual cost to develop the Ocean from conception to delivery is still $1 billion, which is made achievable, once again, by the business's outstanding cost-control skills mentioned above.

Fisker is on track to reach 25,000 reservations for the Ocean by the end of the year and up to 50,000 more in 2022, thanks to management's global rollout strategy, which also includes an aggressive marketing campaign starting in November and the opening of brand experience centers in Los Angeles, Munich, London, New York, Miami, and Copenhagen in 2022. Following the commencement of production, our base case prediction predicts the delivery of at least 40,000 Fisker Ocean vehicles throughout the US and Europe in 2023, consistent with management's first sales guidance and production volume projections.

With a starting price of $37,499 for the entry-level Sport trim and a premium trim starting at $69,900, and with the expectation that the middle edge priced between $50,000 and $55,000 will be the biggest seller, the Fisker Ocean is expected to bring in $2.1 billion in revenue for the automaker in 2023. Additionally, we forecast sales of at least 60,000 units of the Fisker Ocean by 2024, which equates to anticipated revenues of $3.3 billion, based on a scaled-up manufacturing capacity of at least 5,000 units per month beginning in 2023. We forecast sales of the Fisker Ocean to reach up to 81,500 units by 2025, with growth toward 190,000 units by the end of the decade. This is consistent with Fisker's growth aspirations per its Investor Presentation, which is expected to grow at a compound annual growth rate ("CAGR") of 26.8 percent through 2030. A CAGR of 26.4 percent, this amounts to Ocean sales of $4.5 billion by 2025 and $11.1 billion by 2030.

Other Vehicles in the Lineup and the PEAR Program

With strategic partner Foxconn, Fisker's PEAR program development is well underway. Only that it will be a new-segment car with a price of around $30,000 is presently known about the automaker's second EV model. There are no immediate plans to raise additional funds to support ongoing efforts, and the start of production for the PEAR program is scheduled for Q4 2023. This suggests that the $30 million from the SPAC merger proceeds already allocated to the project in the first quarter, and cash from sales of the Fisker Ocean in 2023 may be enough to finance the development phase of the new model. The management has expressed optimism about the PEAR model's sales forecasts, claiming they would "easily be able to sell more than 250,000 cars of it." We forecast PEAR sales of up to 80,000 units in 2024, the first full year of production, and up to 254,000 units by the end of the decade, taking into account Fisker's sales objectives of 200,000 to 250,000 units by 2025 as stated in its Investor Presentation. Thus, PEAR sales will be $1.8 billion in 2024 and increase at a CAGR of 22.5 percent to reach $6.1 billion by 2030.

The Fisker Ocean and PEAR program's predicted sales provide a solid platform for developing and manufacturing two more cars scheduled to be released before 2025. We forecast overall revenues of $8.5 billion by 2025, establishing the framework for at least $11.3 billion by 2026 and growth towards $21.2 billion by 2030 with an average sales price of $59,000 and a target of selling 200,000 to 250,000 units by the end of 2025.

Magna - Fisker Ocean and FM 29 platform production partner. A 6% share in Fisker is being offered to Magna, which may be exercised by meeting specific "interrelated performance standards" (pg. 97 of the 2020 10K). For the Fisker Ocean, the businesses have engaged in a long-term manufacturing agreement that will last until 2029 and includes anticipated production levels and cost parameters. At the carbon-neutral factory in Graz, Austria, which has an annual production capacity of well over 100,000 cars at full ramp-up, Magna has also established several operational areas designated explicitly for Fisker.

The production partner for the PEAR program and the FPFP 28 platform is Foxconn. According to the particular terms of the agreement, Foxconn must make investments in the manufacturing process and the technological supply chain, while Fisker must take the lead on product development, design, and marketing initiatives. After reaching a complete manufacturing ramp-up, Foxconn will eventually be able to handle an annual production capacity of more than 250,000 units across several locations.

Unnamed battery cell manufacturing partner - Fisker is working with one of the five biggest battery suppliers in the world to build prototypes for its battery packs.

The Fisker Ocean's only tire partner is Bridgestone Tires. All Ocean SUVs marketed in Europe and North America will be equipped with specially created, environmentally friendly "Potenza Sport" tires and "Alenza Asport" all-season tires from Bridgestone.

Allego - Fisker has agreed to provide $10 million in private equity to assist Spartan Acquisition Corp.

III's forthcoming reverse merger with Allego, a European EV charging network. The strategic investment will make it possible to jointly create distinctive charging options for Fisker consumers across the European market. The Allego network, which has more than 26,000 charging points spread across 12 countries in Europe, will provide Fisker car owners a year of free charging as an additional advantage.

Fisker's official charging partner for the American market is Electrify America. Through the cooperation, more than 3,500 Electrify America chargers are available in 45 states to owners of Fisker vehicles at special package pricing.

Mekonomen Group is Fisker's authorized partner for fleet management, service and repair, and logistics in the Danish, Norwegian, and Swedish markets.

The official UK partners for Fisker logistics, service, fleet management, and resale solutions are Cox Automotive and Rivus Fleet Solutions.

The Fisker Flexible Platform Agnostic Design, or "FF-PAD," a platform-sharing manufacturing method, is paired with the commercial model. The FM 29 and FPFP 28 platforms, which are currently being jointly developed with Magna and Foxconn for the Ocean and PEAR programs, respectively, can be used in the future for at least two other EV models thanks to the FF-PAD strategy. This unlocks additional cost-savings thanks to a unique ability to scale supply costs by sharing parts and components across multiple EV models and platforms. The FF-PAD manufacturing method also introduces new technologies to the vehicle platform at very late phases of the development process, up to 18 months before launch, cutting the traditional timeframe of 60 months to 29 months. The accelerated development schedule and ability to use the most recent technology inadvertently allow the carmaker to source parts closer to launch and take full advantage of the said cost-efficiencies in the supply chain, with EV components declining year over year as a result of consistent technological advancements.

A gross margin between 19 and 25 percent is anticipated from the asset-lite business model and FF-PAD manufacturing approach, similar to that of competitors in the sector that internalize the production and assembly process. The strategic partnerships are also anticipated to assist Fisker in maintaining total operating costs for R&D and other general and administrative (G&A) spending at 7 percent to 9 percent of total revenues, which is consistent with the cost structure of EV manufacturers who are already at a stage of ramped-up production and successful operations.

Forecast for 2025 for the Fisker stock

Many investors are waiting out with FSR stock because Fisker doesn't yet have a vehicle on the market, and the first car's manufacturing won't begin for another year or more.

Investors now on the fence will rush into the stock once Fisker begins to build its Ocean model and the vehicle is favorably welcomed on the market. This might quickly increase the stock's value and provide big profits for those who purchase it now.

Since its launch, the FSR stock has climbed as high as $32. Inspired by Tesla's record-breaking profits, investors are still hunting for the best EV stock to purchase. By 2025, there's a good potential that the FSR stock may be trading at over $100 if the Ocean launch is successful.

Conclusion

With the adoption of electric vehicles (EVsEVs) accelerating globally, Fisker's innovative asset-lite approach seeks to make considerable cost savings that may be passed along to consumers through competitive pricing. And based on the strategic alliances Fisker has already signed, the automaker is making good headway toward this objective, which, if realized, would have significant long-term benefits. In our opinion, the stock is now cheap and represents an excellent starting position given the above-discussed near- and long-term upside potential.