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Why Fisker Stock Jumped 32% This Year Through June

What happened

In the long parade of electric vehicle (EV) start-ups, Fisker (NYSE: FSR) is toward the back of the pack. It doesn't expect to begin production of its first model, the Ocean SUV, until November 2022. But its unique business model nonetheless has investors excited, and that excitement helped drive Fisker shares up by 31.6% in the first half of 2021.

So what

The stock didn't rise steadily, however -- it tanked along with most EV stocks this spring when investors rotated out of more aggressive growth stocks and into more cyclical sectors. But among the news items relating to Fisker over the past two months were word of an agreement to sell up to 700 vehicles, a new long-term manufacturing agreement with partner Magna International (NYSE: MGA), and a progress update on that manufacturing program.

The electric Fisker Ocean SUV. Image source: Fisker.

Now what

The Ocean SUV will use a modified version of a Magna-developed electric vehicle platform, and be manufactured at Magna's facility in Austria. In June, the two companies finalized a long-term agreement they initially drafted in autumn 2020. "This agreement is broad-based and comprehensive, covering planned volumes, manufacturing costs and quality metrics over the program's lifecycle through 2029," they announced in a joint statement.

By partnering with an experienced vehicle manufacturer, Fisker is differentiating itself from other EV makers and saving on up-front capital investments.

"Our asset-lite model, reinforced by partners like Magna, is powering Fisker toward its planned delivery of the Ocean with features and functions exceeding our original aspirations," said Chairman and CEO Henrik Fisker.

Production is scheduled to begin on Nov. 17, 2022, and Fisker plans to introduce the Ocean SUV at the Los Angeles Auto Show that same month. With more than a year before its first product comes off the assembly line, investors are showing confidence by giving the start-up a $4.9 billion market cap at its recent share price near $16.50.

Some of that optimism may be connected to an agreement the company has already announced to deliver 700 Ocean SUVs in 2023 to U.K.-based electric car subscription service Onto. The subscription plan provides customers with insurance, public charging, and servicing all included.

It's been all good news for Fisker so far, but it has a long way to go if it's going to justify its current valuation. If you invest here, he prepared for volatility, and realize that this stock belongs in the speculative portion of a portfolio.

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Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Magna Int'l. The Motley Fool has a disclosure policy.


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