Down 75% Last Year, Is Fisker a Buy in 2024?

The idea of finding a young electric vehicle (EV) maker poised to soar for years similar to Tesla is obviously enticing, but for many young EV makers, 2023 wasn’t so kind. For instance, California-based Fisker (FSR -2.69%) was hit hard as the EV maker drove over a number of speed bumps — sending its stock sliding 75% lower last year. But is there light at the end of the tunnel in 2024?

Speed bumps

Fisker had a rough year, no doubt about it, but the stock was relatively stable through the first three quarters of the year before plunging in October and November as negative headlines abounded.

For Fisker shareholders, it likely was frustrating to watch rivals, such as Rivian Automotive, pop over the same time frame. Part of Fisker’s plunge was due to Tesla’s price war, when the latter made it clear to competitors and investors that it would sacrifice profitability for incremental volume.

Tesla’s move forced Fisker to slash the price of its Ocean crossover by $7,500 for the top trim a meager four months after launching the vehicle in the U.S. market — not a great sign. That price cut set an ominous tone heading into the company’s third quarter, which only compounded when Fisker delayed its earnings report and conference call.

Making matters worse, the newly appointed chief accounting officer would end up resigning after only two weeks on the job. As if things couldn’t get worse, the company then lowered production estimates to between 13,000 and 17,000 for the full year, down from 20,000 to 23,000 previously, before dropping it even further to 10,000.

If those developments weren’t enough to make investors nervous, the company admitting its last production cut was to free up roughly $300 million in working capital certainly was a red flag.

At the end of the day young EV automakers have substantial challenges, especially with the U.S. EV market growing at a slightly slower-than-anticipated pace. EV makers are dealing with price wars, ballooning inventory, high interest rates, and simply balancing production and deliveries while creating infrastructure and logistics to get products to the consumers — something Fisker admitted was challenging.

The road ahead

As soon as the calendar flipped into 2024, Fisker investors finally got some good news. The company announced it grew deliveries by over 300% from the bumpy third quarter to the fourth quarter, reaching roughly 4,700 total deliveries. The company began deliveries in Canada during December and is operating in 12 markets across the globe.

Perhaps most intriguing was Fisker’s recent surprise announcement to shake up its distribution strategy. Fisker now plans to have roughly 100 dealer locations across Europe and North America and expects its first shipments of Ocean SUVs to hit dealerships by the end of the first quarter.

In theory, it benefits all involved. Consumers will get easier access to Fisker vehicles, and dealer partners will get larger territories with better pricing control and less competition. In reality the switch to using dealerships signals something that might become more clear in the future: If you’re trying to go mainstream, those consumers are more easily reached at dealerships, at least for now.

Is Fisker a buy in 2024?

Make no mistake, investing in Fisker is a risky venture at the moment. The company is young, burning through cash, and is just now beginning to accelerate its production at a time it’s struggling to get product to end consumers. In fact, Fisker’s net cash used in operating activities reached nearly $310 million during the third quarter while its cash and cash equivalents checked in at a modest $625 million — the math isn’t pretty.

The good news is that these are all fixable problems, and if its dealership strategy gains traction over the first half of 2024, optimism could return to investors and a sorely lagging stock price. 2023 could very well prove to be rock bottom for the young EV maker, but savvy investors would be wise to watch how the company executes further production and delivery acceleration before jumping on the bandwagon.