The electric vehicle (EV) world is witnessing the development of an incredible success story in Fisker Inc (NYSE:FSR). Based on its tremendous growth rates and attractive valuation, FSR stock presents one of the best long-term EV plays at this time.
The up-and-coming startup is developing the most sustainable EV in the market, potentially revolutionizing the industry. Moreover, it already has more than 18,600 reservations, up roughly 43% from the fourth quarter in 2020.
FSR stock is one the cheapest EV stocks in terms of its price-to-book ratio (P/B). Its forward P/B ratio of 5.8 times is the lowest among its peer group. Moreover, Fisker boasts a sizeable cash balance of $1.4 billion with no long-term debt maturing before 2026.
Additionally, its management estimates operational expenses to be an average of $332.5 million this year and capital expenditure spending to be an average of $177.5 million. Therefore, it appears Fisker will maintain its strong liquidity position until it reaches its full production.
The Magna Partnership
Perhaps one of the biggest pieces of Fisker’s story is its partnership with EV manufacturer Magna International (NYSE:MGA). For investors, both companies’ value is much greater together than individually, as their relationship is critical for each other’s success.
Moreover, both companies aren’t valued as highly as other unproven EV makers, relying on a more conventional approach to manufacturing and sales. However, it appears that Fisker’s risk-free approach to launching its EVs will be in the limelight soon enough.
Fisker will be utilizing Magna’s services to produce its its flagship sport utility vehicle (SUV) called the Ocean. With Magna’s help, Fisker can substantially reduce development times for its vehicles to around two years.
On the flipside, traditional original equipment manufacturers (OEMs) can take close to five years. Fisker can cut down on its capital outflows and start with an attractive price point for the Ocean at approximately $37,500.
Furthermore, both companies aim to maximize range capabilities through features like larger batteries. Fisker’s highly-appealing, asset-light business model will likely pay dividends down the line, especially with its ability to maintain a robust financial position.
Both companies are looking at a possibility of more than 100,000 production units with just one vehicle line. They plan to reach a peak capacity of 240,000 units by 2025.
The Future of Fisker
So far, Fisker has delivered on its production timeline and other key objectives. It expects to commence deliveries by the fourth quarter next year.
The Fisker Ocean SUV was recently unveiled at the LA Auto Show, which impressed EV experts. Reviews from reputable automobile publications such as MotorTrend have commented on its stylish look, reasonable pricing, and “environmentally conscious vibe.”
The Fisker Ocean is a unique addition to the EV sector with its rotating 17-inch screen, attractive price point and use of recycled materials for interior construction. These will be critical in driving the price of FSR stock to new heights next year.
Magna will help Fisker smoothly launch its products and quickly ramp up production. Moreover, with the added exposure during the LA Auto Show, expect Fisker to meet its 50,000 reservation target well before its production date.
The Final Word on FSR Stock
Fisker has all the ingredients to become the EV leader of tomorrow. It continues to nail all its production targets ahead of schedule and has done so by maintaining solid financial flexibility.
Its partnership with Magna International is an ace in the hole for the company and may become a trend for future EV startups to follow. Hence, FSR stock is a fascinating long-term EV play.
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.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.