With No Differentiation and Stiff Competition, Fisker Is Still a Sell

Fisker (NYSE:FSR) is facing tough competition. What’s more, the company is still not conveying any concrete points that differentiate its upcoming Ocean SUV. Because of that, I remain bearish on Fisker stock. Moreover, I’m less than thrilled with the automaker’s partnership with Magna (NYSE:MGA) as well as the fact that shares continue to trade at a very high valuation.

Given these points — especially the valuation and competition issues — even some pundits who are impressed by Henrik Fisker’s designs have gone bearish on the stock. For example, InvestorPlace contributor Tom Taulli recently called the Ocean’s expected features “standout” and “pretty cool” while also saying FSR could “stall out” in the new year.

Taulli also cited the competition the company faces, as well as the difficulty of mass-producing vehicles and the fact that the Ocean might not be unveiled until the end of next year. He wrote, “it may be better to be patient [with FSR stock]. It seems like a good bet there will be a better price.”

Fisker Stock and No Clear Differentiation

On Jan. 4, FSR announced that the Ocean “will be launched with Fisker Intelligent (FI) Pilot, which will deliver industry-unique features and experiences, including over-the-air updates.” But, other than the over-the-air updates, “hardware to support future upgrades,” and “higher levels of autonomy,” the automaker didn’t make any concrete aspects of the Ocean explicit. So, there’s not much that could be considered exceptional here.

And, of course, Tesla (NASDAQ:TSLA) already has over-the-air upgrades. Moreover, FSR’s car is slated to be released by 2022. Most premium vehicles will likely include similar upgrades and hardware, as well as autonomous elements by then.

So, other than the Ocean’s vegan interior and its potentially superior design, I’m not seeing any points of differentiation for Fisker’s Ocean SUV. That alone doesn’t make a great case for Fisker stock.

Tough Competition

Coming out at the end of 2021, Tesla’s Cybertruck is scheduled to be unveiled a year ahead of the Ocean. So, in light of Tesla’s extremely strong brand name, the company’s huge amount of press coverage and the Cybertruck’s likely head start, Fisker may have a hard time taking any market share.

Now, you might note that the cheapest Cybertruck available this year is still much more expensive than Fisker’s SUV at $49,900. However, I’m not sure how much of a difference that will make to most upper-middle-class and wealthy EV buyers.

And, in late 2022, Tesla will begin selling a Cybertruck rear-wheel drive model which will start at $39,900. That’s much closer to the Ocean’s price tag. Finally, the car’s range is supposed to approach 500 miles — much farther than the Ocean’s reported 300 miles.

On top of that, Tesla is not the only EV maker that FSR is competing against. For one, Ford (NYSE:F) has already launched a highly acclaimed EV this year. In fact, some versions of the Mustang Mach-E include “full-vehicle over-the-air updates” as well as a self-driving system that has the “potential to rival” Tesla’s Navigate on Autopilot. And, in extremely high praise, Green Car Reports says that the Mach-E is “better-looking and better-driving than the Tesla Model Y.” The car starts at $42,895 before tax breaks.

Finally, other venerable companies offering competitive EVs include Audi, Jaguar Land Rover, and Toyota (NYSE:TM) via its Lexus brand. So, why land yourself with Fisker stock when there are so many other options?

A Less-Than-Optimal Partnership

But that’s not all. There’s one more reason to be bearish on Fisker stock: it’s recent partnership.

Fisker has recruited Canadian auto-parts maker Magna to manufacture its Ocean SUV. Recently, Autoweek reported that Magna has manufactured “more than 3.7 million vehicles” in its history. However, compared to other companies, that’s actually not that many vehicles.

For comparison, Volkswagen (OTCMKTS:VWAGY) — the automaker that Fisker tried to partner with before the deal fell through — delivered 6.3 million vehicles just in 2018. Further, Magna does not appear to have a great deal of experience making EVs. In fact, one of the only EVs the company has ever made is the Jaguar I-Pace.  And not very many of those vehicles have been sold at all.

Bottom Line

So, Fisker’s Ocean is poised to face some very tough competition in the electric SUV space. With no concrete, competitive advantages right now, the EV doesn’t have a ton going for it. Moreover — although FSR was smart to recruit a manufacturing partner — Magna is far from the best choice.

With all of these issues and Fisker stock’s market capitalization still over $4 billion, I continue to recommend that investors sell the shares.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.