Home Business Fisker tumbles on warning; ‘hard to make’ investment case at this stage, analyst says

Fisker tumbles on warning; ‘hard to make’ investment case at this stage, analyst says

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Fisker tumbles on warning; ‘hard to make’ investment case at this stage, analyst says

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Fisker (FSR) unloaded a cache of bad news during its Q4 earnings report yesterday, shaking investors and Wall Street analysts.

Fisker reported that given its financial condition, evolving dealership sales approach, and challenging EV market, it has “substantial doubt about its ability to continue as a going concern” when the company files its official financial statements for 2023. Fisker also said it would reduce its headcount by 15%.

Fisker said it had $396 million in cash at the end of Q4, though $70 million of that is restricted. Fisker said it is in talks with a current noteholder about making an additional investment in the company and that it’s negotiating with “a large automaker for a potential transaction which could include an investment in Fisker, joint development of one or more electric vehicle platforms, and North America manufacturing.”

The Fisker Ocean, the new all electric SUV from the American automaker, exhibited at Mobile World Congress (MWC) the biggest trade show of the sector focused on mobile devices, 5G, IOT, AI and big data, celebrated in Barcelona, on March 3, 2022 in Barcelona, Spain.
 (Photo by Joan Cros/NurPhoto via Getty Images)

The Fisker Ocean, the new all-electric SUV from the American automaker, exhibited at Mobile World Congress (MWC) the biggest trade show of the sector focused on mobile devices, 5G, IOT, AI and big data, celebrated in Barcelona, on March 3, 2022, in Barcelona, Spain. (Joan Cros/NurPhoto via Getty Images) (NurPhoto via Getty Images)

While talks of a cash infusion and strategic partnership with an established automaker are welcome news, it wasn’t enough to end doubts of Fisker’s precarious condition. Shares of the EV maker tumbled over 40% in early trade, with shares now stuck below $1 since early January.

Citi analyst Itay Michaeli generally feels Fisker’s lone product, the Ocean EV, holds promise and isn’t surprised that a large automaker is interested in investing in Fisker, but this isn’t enough for him to keep the faith in Fisker.

“Securing such an agreement would likely serve as a major positive for Fisker, but it’s hard to underpin an investment thesis entirely on this, and we would’ve liked to have seen more progress on this front by now,” Michaeli wrote in a note to investors. Michaeli downgraded the stock to Neutral/High Risk (equivalent of a Hold) and cut his price target to $.80 from $4.

In Q4, Fisker reported revenue of $200.1 million, missing Bloomberg consensus estimates for $272.9 million, and a net loss of $463.6 million, much wider than the $82.7 million loss expected.

“2023 was a challenging year for Fisker, including delays with suppliers and other issues that prevented us from delivering the Ocean SUV as quickly as we had expected,” chairman and CEO Henrik Fisker said. “There were a number of unanticipated challenges, including rising interest rates, finding enough skilled labor, and identifying appropriate real estate locations to make the DTC model function effectively.”

Fisker CEO Henrik Fisker introduces the all-electric off-road Ocean called the Force E during its inaugural

Fisker CEO Henrik Fisker introduces the all-electric off-road Ocean called the Force E during its inaugural “Product Vision Day” in Huntington Beach, Calif., on Aug. 3, 2023. (FREDERIC J. BROWN/AFP via Getty Images) (FREDERIC J. BROWN via Getty Images)

Fisker’s challenges in setting up its direct-to-consumer model led the company to seek out traditional dealer partnerships, with the company revealing it now has 12 dealer partners on hand and over 250 dealers interested.

While talk of new partnerships and a dealer sales network is promising, the main concern for investors is Fisker’s lack of cash.

“If the company had ample liquidity through 2025, then risk/reward would arguably be interesting here with the stock having come under significant pressure,” Michaeli wrote. “But with the liquidity runway narrowing and accounting/reporting issues still unresolved, it’s hard to make an investment case here with such poor [near-term] visibility.”

Programming note: Be sure to watch Fisker chairman and CEO Henrik Fisker live on Yahoo Finance today at 4 p.m. ET.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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