There's little doubt that it's a tough time to be an electric vehicle (EV) manufacturer. Companies not named Tesla (TSLA 2.07%) are burning cash producing EVs at low volume with high costs, and range anxiety, pricing, interest rates, and quality questions have caused investors to lose sleep at night.
Fisker (FSR +0.00%) hasn't escaped these concerns, and with the stock plunging 81% in November, is it time for investors to press the panic button?
What happened?
It's pretty clear taking a look at the graph below that November was a rough speed bump for the young EV maker.
OTC: FSR
Key Data Points
Heading into November, Fisker was fresh off slashing the price of its Ocean crossover by $7,500 for the top trim only four months after launching it in the U.S. market. The price decrease was a ripple effect of Tesla's price war, which caused numerous rivals to slash prices or boost incentives -- sometimes both.
That price cut created a weary tone heading into the third quarter, which was made far worse when Fisker delayed its earnings report and conference call. That delay, caused by the appointment of a new chief accounting officer, sent the stock sharply lower -- and the new chief accounting officer would resign within two weeks of taking the role.
Then, as one would probably expect, when Fisker did report its third-quarter earnings roughly one week later, it cut its 2023 production guidance in a mostly gloomy earnings report. It then estimated production to check in between 13,000 and 17,000 vehicles for the full year, down from 20,000 to 23,000 previously.
Management noted that the company simply hadn't been able to deliver its vehicles fast enough, and that paying consumers were waiting for cars and "getting really annoyed," which doesn't exactly inspire confidence among investors.
So what?
It's clear Fisker is facing challenges that many young EV makers face: balancing production and deliveries as it creates infrastructure and logistics to get product to consumers. That's exactly what management is focusing on currently, to adjust guidance and get vehicles to consumers, as it might take a vehicle up to eight weeks longer to reach consumers in the U.S. market compared to European consumers.
"This is a very prudent change that we need to do to enable our global delivery and logistics platform to scale so we can serve our customers even better and we are not sitting on inventory," Fisker CFO Geeta Fisker said on the third-quarter earnings conference call. "It may not be something Wall Street wants to hear."
Now what
Fisker's third-quarter earnings also checked in with a net loss of $91 million, worse than analysts' estimates of a $75 million loss. Ultimately, these are growing pains that early investors should have planned on enduring. Remember that Fisker doesn't have a manufacturing plant and relies on partnerships to make its vehicles.
While November was a massive speed bump for the company, investors did receive some decent news that injected some life into the stock price as the calendar flipped over to December. The news was that Fisker would again dial back production from a range of 13,000 to 17,000 down to just over 10,000, but that the reduction would improve liquidity and unlock over $300 million of working capital for business "flexibility".
Ultimately, the news that Fisker was prioritizing its financial health over short-term production numbers gave investors a glimmer of hope amid a rough couple of months that sent its stock plunging. It perhaps gives investors more confidence about the company's ability to get to its next two vehicles, which are aimed to be an affordable subcompact crossover and a midsize pickup. In other words, things are rough, but the time for investors to panic isn't here just yet -- but things could get worse before they get better.
