Last week, U.S. President Joe Biden signed an executive order that intends to make 50% of all new vehicles sold in the United States electric by 2030, in order to reduce greenhouse gas emissions in the U.S.
This has resulted in a renewed interest among investors in electric vehicle (EV) stocks.
Let us compare two companies: Tesla, an established player when it comes to EVs, and Fisker, using the TipRanks Stock Comparison tool, and see how Wall Street analysts feel about these stocks.
Fisker is a startup that is still in the process of developing its first EV, Ocean. The stock has shot up 23.9% in the past five days, following its Q2 results. At the end of Q2, the company’s cash and cash equivalents stood at $962 million with zero debt. Fisker has yet to earn any revenues.
For FY21, the company is projecting operating expenses to range between $295 million to $320 million while capex is expected to vary from $195 million to $210 million.
In Q2, Fisker entered into a long-Term Manufacturing Agreement with Magna Steyr for the production of Fisker Ocean in Europe. The company has now a firm date of starting production of Ocean from November 17, next year, and intends to ramp up production capacity to over 5,000 vehicles per month during 2023.
In May this year, Fisker entered into a memorandum of understanding (MOU) with Hon Hai Technology Group (Foxconn) to develop a “breakthrough” EV. The EV project has been codenamed ‘Project PEAR’ (Personal Electric Automotive Revolution).
The company indicated in its Q2 earnings release that it is making “progress on concept engineering of the FP28 platform and PEAR vehicle.”
As of August 2, Fisker is approaching 17,500 retail reservations and 1,400 fleet reservations for Ocean. It expects that reservations will accelerate once the company unveils a “production-intent version of Fisker Ocean” at the L.A. Auto Show later this year and is targeting 25,000 reservations by the end of this year.
The company is pursuing an “asset-light strategy” and is tying up with different partners to enable it to “work on multiple platforms and vehicles concurrently to achieve sequential future product launches.” (See Fisker stock chart on TipRanks)
This strategy has found favor with Morgan Stanley analyst Adam Jonas, who resumed coverage of the stock with a Buy rating and a price target of $40 with a 118.9% upside. Jonas commented, “…what attracts us to Fisker is the company's focused strategy on design and engineering and supply chain while leveraging the Magna-Steyr relationship in contract manufacturing to derisk the ramp, accelerate time to market and provide a path to scale and profitability.”
“We believe Fisker is meant to display the power of what can happen when a clean-sheet approach leverages Magna's contract manufacturing. The shared/vested interest and Fisker's design and experience, combined with reasonable valuation underpins the Overweight,” the analyst added.
Turning to the rest of the Street, consensus is that Fisker is a Moderate Buy, based on 5 Buys and 2 Holds. The average Fisker price target of $26.33 implies an approximately 44.1% upside potential from current levels.
Tesla (NASDAQ: TSLA)
Tesla has been at the forefront of the EV revolution. In Q2, the company’s revenues surged 98% year-over-year to reach $11.96 billion, ahead of the consensus estimate by $560 million. This was a record-breaking quarter for the company, as its quarterly net income surpassed $1 billion for the first time in its history. Non-GAAP EPS of $1.45 came in $0.47 above the Street’s forecast.
However, Tesla is experiencing some issues. The buyers of the company’s Model S are experiencing significant delays when it comes to vehicle delivery. According to an electrek report from yesterday, the company has not explained the continuous delays in an apologetic email it sent to the car's buyers.
The issue is clearer in the company's SEC filing, in which it stated that its current production has been hampered by semiconductor and component shortages, “requiring additional workaround manufacturing and production design solutions to be implemented which may be difficult to sustain.” (See Tesla stock chart on TipRanks)
Interestingly, analysts are cautiously optimistic about Tesla, as they have different takes on TSLA’s growth story. Jeffries analyst Philippe Houchois acknowledged the capacity constraints faced by TSLA and expects that from next year, “we see more global BEV [battery electric vehicle] demand, more battery and assembly capacity (+40% to 1.6m), a broader and mix-accretive model line-up and still no legacy issue.”
The analyst upgraded TSLA from a Hold to a Buy and raised the price target from $700 to $850 (19.7% upside) on the stock around two days back. Houchois was of the view that the company “produced its strongest and cleanest set of numbers in Q2,” prompting the analyst to raise FY21-22E estimates “17% on higher gross margin and continued leverage of opex.”
In contrast, Morgan Stanley analyst Adam Jonas pointed out that TSLA’s adjusted EBITDA margin of 21% in Q2, that is a measure of the company’s operating profit as a percentage of its revenue, could be “too high” and “much closer to the luxury end of the auto market than to the average industry margin.”
The analyst reiterated a Buy rating and a price target of $900 (26.8% upside) on the stock following the Q2 results.
Analyst Adam Jonas is of the view that TSLA should look at making its vehicles available at lower prices, to as many people as possible, by looking at investing its margin back into the price. The analyst is of the view that the profitability of Original Equipment Manufacturers (OEMs) will be from monetization through different revenue streams, including software.
In contrast, analyst Houchois is of the opinion that while legacy OEMs continue to progress when it comes to EV powertrain and lineups, Tesla has an edge over them when it comes to “product complexity, inventories, direct selling and initiatives in selling subscription services.”
Turning to the rest of the Street, consensus is that Tesla is a Moderate Buy, based on 13 Buys, 6 Holds, and 6 Sells. The average Tesla price target of $732.09 implies an approximately 3.1% upside potential from current levels.
While analysts are cautiously optimistic about both stocks, based on the upside potential over the next 12 months, Fisker seems to be a better Buy.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities