Shares of up-and-coming electric vehicle company Fisker (NYSE:FSR) are on an up-and-down ride. FSR stock jumped almost 50% in a month, then dropped 17% on Aug. 12.
Multiple catalysts drove it higher, including its manufacturing contract with Magna (NYSE:MGA), and its addition to the Russell 3000 index. But the market responded poorly to the company’s announcement it was selling $600 million of convertible senior notes.
With most companies in the EV space, FSR stock has been on wild ride since the beginning of the year. Fisker hasn’t had a car on the road and hasn’t made a dollar in revenue, but investors remain keenly interested.
It’s plausible that meme stock mania caught onto FSR stock and lifted its price for a short period. However, for the most part its growth has been driven by the company’s positive developments. With its strong leadership, competitive product, robust partnerships, and asset-light model FSR stock is a fascinating EV pure play.
Fisker signed an MOU with Foxconn earlier in February, which has gotten solidified into an agreement in May. Both companies will be co-developing an EV which will hit markets in the fourth quarter of 2023. This five-seater vehicle will be priced under $30,000 and will be sold under the Fisker brand name.
Furthermore, in a recent shareholder meeting, the company reassured investors that its on course to deliver its flagship Ocean SUV by November 2022. It states that its cost structure is in line with expectations and it has sourced the parts needed to meet its production goals. Moreover, it will also showcase the Ocean at the LA Auto Show in November this year.
Another major development for Fisker was the signing of its manufacturing agreement with Magna International. Magna handles the manufacturing process for Fisker and its agreement lays down the volumes, pricing, and other core details of the arrangement. Moreover, both companies have also opened up a new prototype facility in Austria with a capacity of 1,500 vehicles annually. They hope that the facility could be ready for scale production by next year.
Fisker’s Growth Potential
The exciting developments mentioned earlier coupled with Fisker’s asset-light business model and visionary leadership point to a healthy growth runway ahead. Its Foxconn deal along could generate more than $3.5 billion in annual revenues after three to five years.
Moreover, with an average price of $50,000 and a conservative estimate of 50,000 sales volume for the Ocean, the company could generate $2.5 billion on annual basis starting 2023. If you combine the two deals together, they more than justify its current market capitalization of $4.6 billion.
Additionally, it can deliver over 15% to 20% growth in the medium term even after its core revenue sources are in play. This can be effectively achieved through the addition of new vehicles and innovative features. For instance, Fisker and Magna are developing a new cutting-edge ADAS feature which includes digital-imaging radar technology. Therefore, the company is an excellent position to grow its portfolio by leveraging its unique competencies.
Final Word On FSR Stock
FSR stock has had a healthy run-up in off-late on a string of positive developments with its underlying business. Fisker’s recent partnerships with Magna and Foxconn have strengthened its commercialization prospects.
However, it needs to remain on track to continue meeting its targets and further solidify its bull case. Therefore, you should bet on FSR stock at this time.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.