Dec 9, 2021
[7 min Read]
There have been many great articles on Seeking Alpha about the history of Fisker, what makes Fisker unique (using MAGNA and FOXCONN as contract manufacturers much like NIO has done), and some of the troubled history of the failed Fisker Karma. I will not focus on those details here. Suffice to say that Fisker was one of the early pioneers in the EV race and launched his iconic Fisker Karma BEFORE the Tesla Model S. Yes, he ran into some issues with his battery supplier and yes, his previous company did go belly-up. But America is all about comebacks and I believe Henrik will be coming back stronger than ever. I like the fact that he has failed in the past, because that will just make him hungrier to prove himself and learn from his mistakes.
Specifications from the LA auto show indicated features are class leading at their price point
You will not find any EV with this range, feature set and dynamic style in this price class (please check www.fiskerinc.com for more details and to reserve one with a $250 deposit). It's a class leading SUV that starts at $37,499 ($29,999 with current federal subsidies - likely to increase).
“Delivery” of cars is really only 4 months away
Most people think the company is 1 year or more behind Rivian or Lucid, but that is simply not the case. In the recent earnings call on Nov 3rd, 2021, Henrik Fisker said that “well over eight months before we launch the vehicle” that Fisker will be “building two vehicles a day”. With SOP (Start of Production) slated to be on November 17th, 2022, this implies that they will be building 2 cars/day starting around March 2022. Assuming approximately 261 days until SOP, that means 522 cars that will be built before the official SOP.
What will Fisker do with these 522 cars? It's just way too many for crash-testing and homologation. As a point of reference, Lucid said it plans to deliver only 520 cars by the end of 2021 and only 20,000 Lucid Air sedans in 2022. On December 1st 2021, Henrik stated after the auto show “we are well over 20,000 [reservations] and the numbers go up every few minutes.” Difference in their respective market cap? How about $6 BN in market cap for Fisker and over $80 BN in market cap for Lucid - 10x as much! Yes, Lucid is delivering 20,000 cars in 2022 vs Fisker delivering (in my model) 75,000 cars in 2023, but is that valuation differential warranted?
Also, Lucid reservations holders have recently been alerted to expect delays and it looks increasingly unlikely that the 520 delivery number for 2021 will actually materialize. Lucid also announced yesterday that it is being investigated by the SEC for its SPAC deal with Churchill Capital. Fisker announced on the same day that "Our merger with Spartan Energy Corp, completed in October 2020, was reviewed by the SEC and other relevant regulatory authorities, To date, we have not received any requests for additional information from the SEC relating to the merger transaction and, to our knowledge, we are not under any investigation by the SEC regarding our SPAC merger”.
I know where I would rather put my money. What happens if Fisker delivers some of these pre-production cars to employees or “friendlies” much like Rivian has done? We have to realize that the start of production means different things to different people. Simply because Rivian owns their own plant, their definition of start of production is very different than FSR's which relies on contract manufacturers. Before you start to complain about Fisker's lack of owning their own plant, just look at NIO's $60 BN market cap and it's run from $2 to $33 to realize that outsourced production can be very successful.
Anyway, let's get back to Lucid's recent history to get a sense of what a stock price reaction might look like for FSR when we start seeing some cars on the road. On Oct 27th 2021, Lucid issued a press release stating that customer deliveries of its Lucid Air Dream Edition (priced at $169,000) would start on Oct 30th, 2021. Lucid surged as much as 47% the next and the stock eventually went from $27.69 to $45.92 in 7 trading days! A staggering 65% return in 7 days.
What would happen with Fisker's stock if it could start “delivering” cars in March 2022, which is less than 4 months away? A similar move in FSR would yield a $18.34 to $30.26 move. What happens when Fisker allows press and auto magazines to start test driving the car and they get blown away with 550bp, 0-60 MPH in less than 3.6 seconds, smart traction (allows the right amount of torque to the correct wheels) and “race-car” like handling?
Fisker also features an innovative flexible leasing model with no long-term contracts. This can generate “more than 250% margin on these vehicles long-term” as Henrik mentioned on the Q3 2021 conference call. FSR can lease their cars over and over again over a 12-year life span and charge each new customer for OTA (over the air) updates for different software enhancements.
Putting it all together in a model
So, now that we know Fisker could pop once their cars start rolling off the pre-production line around March 2022, what is the company really worth over the long-term? Morgan Stanley's Adam Jonas resumed coverage of Fisker with a $40 PT and a bull case PT of $90 on August 10, 2021. News has gotten dramatically better since then, and Jonas has yet to appropriately update his model.
We not only had the LA auto show, the news that Fisker was using battery packs from CATL (largest battery supplier in the world) with class leading LFP chemistry, but also critical news that Foxconn signed a definitive agreement to purchase the 6.2 MM square foot Lordstown facility in order to produce the Fisker PEAR. This factory gives Fisker the ability to take advantage of any incremental EV federal credits for producing in the US. Henrik even said in an interview that this means that PEAR production could be moved up earlier. He has also dropped hints that Magna is ahead of schedule for the Ocean. Please show me ONE EV company that has announced being early to market.
On the February 21th, 2021 conference call an analyst asked “in the announcement from yesterday, you talked about the Foxconn relationship alone to be 250,000?” and Henrik answered “could see surpassing our original goal of 250,000 by 2025.” Then, on the Q2 call August 6th 2021, Henrik stated that when JUST speaking about the Ocean “I think we will easily be able to sell more than 250,000 vehicles of that a year and just wait to see it. It's just amazing. In terms of the last two vehicles for its total plan of, four coming together between before 2025, we actually already have designed the third vehicle and the fourth vehicle will be already in negotiations for something pretty unique about that vehicle as well. So the four vehicles actually are on plan.”
Taking all this new information, Henrik's recent tweets, and some factoids from the recent conference calls and running it through a model yields some pretty impressive stock prices. The peer group trades as forward sales multiples of between 14x (Tesla) to 35x (Lucid), so let us use a starting multiple of 14x for Fisker and we get the following resulting stock prices:
2023 2024 2025
Total Global EV Market (in MM) 8,500,000 11,000,000 14,000,000
Growth Rate 29% 27%
Ocean Units 60,000 175,000 250,000 Growth Rate 192% 43%
Pear Units 5,000 75,000 250,000
Growth Rate 1400% 233%
UFO Units 10,000 50,000 90,000
Growth Rate 400% 80%
TBD 4th car 15,000 60,000
Growth Rate 300%
Total Units 75,000 315,000 650,000
Implied Growth Rate 320% 106%
% of Total Global EV sales 0.88% 2.86% 4.64%
ASP (Blended) $50,000 $45,000 $40,000
Total Revenues (in $MM) $3,750 $14,175 $26,000
Share Outstanding (In MM) 314 330 346
P/S Multiple . 14 13 12
Implied Stock Price $167 $559 $901