What happened
Shares of Fisker (FSRN 57.50%) stock crushed the market in June, climbing 45.4% according to data from S&P Global Market Intelligence. The catalyst for the rapid rise was an announcement that the company has signed a manufacturing contract with Magna (MGA -1.04%) and the stock's addition to the Russell 3000 index on June 28.
It is also possible that Wall Street Bets traders on Reddit are converging on Fisker stock again, which could be why the price has risen so much in such a short time period.
Image source: Getty Images.
So what
Like most companies in the electric vehicle (EV) space, Fisker stock has gone on a wild ride this year. Even though it doesn't have a car on the road and has never generated a single dollar in sales, let alone profits, investors can't get enough of this company.
Digging into the news that came out this month, the addition to the Russell 3000 should have no bearing on Fisker's long-term stock performance. However, the contract with Magna is something that could affect the business. According to Fisker's press release, the deal is a binding long-term manufacturing agreement. Importantly, in the release, Fisker stated that Magna is set to begin production of its Ocean SUV in November 2022.
Outside of any announcements from the company, the big stock move might have been exacerbated by Reddit traders. Along with Tesla (TSLA 4.96%) and Nio (NIO -0.48%), Fisker stock has been a popular discussion topic on the Wall Street Bets subreddit. As we've all seen with the historic rise of GameStop (GME 2.56%) and AMC (AMC) in 2021, these retail traders can have massive impacts on a stock's share price in the short run.
Now what
45.4% monthly returns would put a smile on anyone's face, but investors should understand the risks associated with owning shares of Fisker. The stock has a market cap of $5.44 billion and zero revenue. It also is not expecting to sell any vehicles until the end of 2022 at the earliest, which could easily be pushed back if problems arise.
Fisker has almost $1 billion in cash on its balance sheet, but with the huge research and development expenses along with the huge amount of capital expenditures needed to scale automotive manufacturing, it will likely need to raise billions more before it ever generates a profit. This will further dilute existing shareholders. Taking all this into consideration, it looks like buying Fisker is pure speculation at the moment, making it a poor choice for any risk-averse investor's portfolio.
