Shares of electric car company Fisker (NYSE: FSR) are crashing in Monday trading, down 8.1% through 2:30 p.m. ET, hurt by a pair of negative reports from Wall Street firms.
Early Monday morning, Evercore ISI's Chris McNally downgraded Fisker stock from outperform (sell) to in line (hold). R.F. Lafferty analyst Jaime Perez quickly piled on by lowering that firm's price target on Fisker from $7 a share to $3 a share, as TheFly.com reported.
What Wall Street is saying about Fisker
The news wasn't all bad. Lafferty's new price target of $3 a share is actually 50% above the $2 target that Evercore assigned to Fisker stock -- and nearly 100% above Fisker's current share price of $1 and change. Plus, Lafferty retained its buy rating on the shares.
But even so, the news was bad enough.
As both analysts pointed out, Fisker recently cut its production target for this year, and now believes it will end 2023 with only 10,000 electric cars produced -- instead of the 13,000 to 17,000 units it had previously predicted. And even Lafferty, which continues to recommend the shares, admitted that 2024 is looking similarly rough for Fisker, with delivery delays likely to continue, and earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates cut from $174 million all the way down to $103 million.
Evercore was even more blunt in its assessment: Fisker faces a "highly precarious tightrope of execution, brand risk, capital raises and dilution." There's little hope the company will be able to compete with larger EV producers such as Rivian and Lucid, much less with the established leader, Tesla. Accordingly, Evercore says "it's time ... to throw in the towel."
Is Fisker stock a sell?
And yet, in the end, Evercore, did not throw in the towel, or at least not all the way. Instead, Evercore ended up rating Fisker stock a hold, and assigning it a $2 price target that actually implies it could go up over the next year, not down. Indeed, if Evercore's rating is to be taken at face value, its analysts think Fisker stock could actually gain more than 25% in the next 12 months.
So what's an investor to do given these mixed signals from Wall Street? Hold onto Fisker stock and hope? Buy more in hopes the stock will double? Or ... sell and buy something better than Fisker?
It really depends on how much risk you can handle.
On the one hand, when I look at Fisker, I see a $600 million market cap company with more than $600 million in net debt, no profits, and a cash-burn rate of more than $800 million -- a clear sell, in other words. On the other hand, most analysts on Wall Street still predict Fisker could turn profitable as early as 2025. If they're right about that -- and right about the volume of profits Fisker will earn, $0.29 per share in 2025 -- then this is a stock trading for only about 5 times earnings two years out.
I guess in the end, what I'm saying is that there's a chance Fisker will still succeed. But I still wouldn't bet on it. With Fisker stock, I think discretion is the better part of value.
10 stocks we like better than Fisker
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Fisker wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of December 4, 2023
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
