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Why Fisker Stock Is Soaring Today

By John Rosevear - Nov 9, 2020 at 1:11PM

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A Wall Street analyst has an intriguing take on the electric-vehicle start-up.

What happened

Shares of electric-vehicle start-up Fisker ( FSR -1.93% ) were sharply higher on Monday, after a Cowen analyst initiated coverage of the stock with a bullish note.

As of 1 p.m. EST, Fisker's shares were trading at $14.35, up about 32.1% from Friday's closing price.

So what

In a Monday morning note, Cowen analyst Jeffrey Osborne initiated coverage of Fisker with an outperform rating and a price target of $22. 

California-based Fisker went public after its merger with special-purpose acquisition company Spartan Energy Acquisition closed in October. The company is developing an electric luxury SUV called the Ocean, which will be manufactured under contract by global auto-industry supplier Magna International ( MGA 3.01% ). Production is expected to start in the fourth quarter of 2022. 

A silver Fisker Ocean prototype.

Fisker's electric Ocean SUV is expected to launch in late 2022, with a starting price under $40,000. Image source: Fisker.

As Osborne sees it, Fisker's go-to-market plan, which doesn't require the company to build its own factory, is "the opposite of the ramp experience" that Tesla went through, when it spent months and billions of dollars working to get production of its Model 3 sedan up to full speed. (Magna's Magna Steyr unit has extensive experience with contract manufacturing for automakers.) 

Osborne believes that Fisker's plan to hand off manufacturing to Magna will allow it to bring the Ocean to market in a "capex-light manner," driving "significant" free cash flow in 2024 and 2025. 

Now what

Auto investors intrigued by Osbourne's note will want to stay tuned. While Fisker hasn't yet set a date for its first earnings report as a public company, it's likely to happen in the next few weeks. Fisker raised about $1 billion via the merger; as part of the earnings report, I expect that CEO Henrik Fisker will update investors on the company's plans to deploy its fresh capital over the next couple of years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Fisker, Inc. Stock Quote
Fisker, Inc.
FSR
$17.28 (-1.93%) $0.34
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$1,009.01 (-0.59%) $-5.96
Magna International Inc. Stock Quote
Magna International Inc.
MGA
$79.38 (3.01%) $2.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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