Shares of luxury electric car start-up Fisker (FSR +0.00%) bounced back 7.5% in early trading Wednesday -- one day after its historic post-earnings collapse in share price Tuesday, which sent Fisker stock plummeting to an all-time low of $3.34 per share. Investors can probably thank a research note from Bank of America for the rebound. But will it last?
Because as of 10:30 a.m. ET, Fisker has already given back most of its early gains and is up a small fraction of 1%.
OTC: FSR
Key Data Points
BofA says "buy"
In its note out this morning, Bank of America announced it was lowering its price target on Fisker stock from $8 to $6.50 per share. Yet even so, the banker's new price target implied that this electric car stock could nearly double in price over the next 12 months.
And so, just one day after Fisker suffered a near-19% sell-off, BofA told investors to buy it.
According to BofA, this is more than just a story about a stock that's become suddenly cheap. BofA also believes that Fisker's "long-term story remains on-track," as TheFly.com reports this morning.
But why would BofA say that, though, just one day after Fisker reported a $0.27-per-share loss that was 42% worse than expected and nearly $340 million in quarterly negative free cash flow -- more than twice as bad as a year ago?
Dang the losses, full speed ahead!
Presumably, what has BofA feeling optimistic about Fisker despite the big earnings miss is the fact that -- losses notwithstanding -- Fisker is at least growing its sales strongly.
As Fisker noted in its earnings release, Q3 2023 sales came in at roughly 90 times Q3 2022 sales, and Q4 could be even better. Fisker furthermore delivered more electric cars to its customers in October (which is part of fiscal Q4), than it reported in all of Q3, and management says demand for its Fisker Ocean EV remains strong.
Losses, while larger than investors hoped to see, were still only about half as bad as the losses in Q3 2022. And with Fisker producing roughly four times as many cars as it delivered in Q3, chances are good that the company will see more cash coming in as those EVs get delivered in Q4.
Investors had better hope this is the case, at least.
Because at last report, Fisker had only about $625 million in cash remaining, and as it ramps up production, its rate of cash burn has accelerated to about $830 million per year. That gives Fisker only about three quarters left to hit its stride before lack of cash becomes a really big concern. Caveat investor.
