Fisker Inc. price implosion; is it time to buy the dip?
Already technically a penny stock trading beneath $5, shares of Fisker Inc. (NYSE: FSR) are on track to make it more than a technicality. The Q3 results continue a trend by other EV OEMs, such as Lucid Group (NYSE: LCID), which failed to meet delivery goals, and Mullen Automotive (NASDAQ: MULN), which crushed its share price with dilution. Those factors, and a material issue with financial reporting, have the stock price imploding, and the short interest isn’t helping.
The short interest ahead of the report was over 45% and will likely remain high until the shares retreat to rock bottom or business traction is improved. The upshot is that production and deliveries are ramping for this automaker, providing a clearer trajectory for revenue growth and profitability, and someone is buying this dip.
Delivery issues impair Fisker Inc. Q3 results
Fisker Inc.’s Q3 results were enough to cause a double-take, with revenue missing the consensus estimates by 4700 basis points or about $64 million. The cause for the shortfall was tepid deliveries hampered by final mile logistics and the company’s budding delivery system. Production for Q3 topped 4,700 vehicles, in alignment with expectations, but deliveries came in at a tepid 1,097.
The upshot is that traction is already improving, with October deliveries of 1,200 and further scale gains expected as the quarter progresses. The company says it delivers in 10 countries with over 3,000 vehicles on the road. Operational momentum is forecast to accelerate again in Q1, with 2 new markets opening by the end of Q4, 3 in Q1, and higher deliveries in current markets.
Earnings were another mixed bag, with net losses contracting and GAAP EPS losses falling nearly 50%. The bad news is that losses were more than expected but offset by the delivery weakness. Assuming that deliveries continue to ramp as forecast, the Q4 results should be solid. As it is, the analysts expect Fisker Inc.'s revenue to grow nearly 700% sequentially, and they may be overestimating the gains. Fisker will have to ramp production and get deliveries to match production to come even close to that figure.
The analysts have been lowering their price targets for Fisker stock but still rate it a Hold and see it moving higher at the low end of their range, about 17%, but that may change once the 10-Q is filed. The company announced it would delay filing due to material weaknesses in internal controls related to the unexpected departure of the CAO in October, which may result in the refiling of results.
Capitalization improves, and shareholders pay for it
Fisker Inc. is sufficiently capitalized for the next few quarters. The company raised $450 in gross proceeds and can raise another $550 if (when) it needs to. This has cash and securities at $625 million, down from last year, but sufficient to sustain the operating loss for several quarters without the inclusion of ramping revenue.
Because inventory is up significantly compared to last year and production and deliveries are ramping, cash flow is expected to improve and operating losses to narrow, bringing profitability into sight. Profitability is expected quarterly late in 2024, with FY profits achieved in 2025.
The downside is dilution. The company has issued over a half billion in 0% senior secured convertible bonds and can raise the figure to over $1 billion if needed. That’s on top of other dilutive actions, including share sales and share-based compensation, which have the stock float up sequentially compared to last year. The share count is up 13% YOY and should be expected to grow over the coming quarters.
Fisker shares trend lower
As bright as the future for Fisker is, the share prices continue to trend lower. The stock fell 20% following the Q3 release and may continue to fall, given the outlook for dilution and the potential for misstated results. The market could fall into the $1 range or lower in this scenario.
However, the 20% decline is a potential capitulation for the market and may mark the bottom of the sell-off. Bottom-seekers, dip-buyers, and speculators may step in, not to mention the possibility of short-covering, and there is evidence of buying in action.