Fisker may grow out of its ugly duckling phase in the ever-growing electric vehicle market, Bank of America said. Analyst John Babcock initiated coverage of the underperforming electric vehicle stock at a buy. His $8 price target implies the stock can rally 50.7% from where shares finished Monday. “FSR offers investors pure-play exposure to the rapidly growing EV market, has key milestones coming in 2024 and a lower risk business model than peers,” he said in a note to clients Tuesday, also describing the stock as a “pure-play EV force.” Fisker popped 6.2% in early trading on Tuesday. But the stock has tumbled nearly 20% this year, meaning it has underperformed both the broad S & P 500 index and the Global X Autonomous & Electric Vehicles ETF (DRIV) , which are both up on the year. FSR .SPX,DRIV YTD mountain Fisker vs. the S & P 500 and DRIV ETF this year Babcock described Fisker’s first product, a car called the Ocean that launched earlier this year, as both attractive and compelling. He said there should be a “meaningful inflection” in volumes next year that can push revenue up and help breakeven on EBITDA, which he noted would be a major moment for the stock. Looking ahead to 2025 and beyond, he said continued growth should be aided by the launch of a smaller car and pickup truck. Babcock said the company could sell 385,000 units annually by 2030. The stock traded at a discounted sales-to-enterprise value multiple compared with Tesla ‘s early history. It’s also at a discount compared with EV peers Lucid and Rivian . Babcock said the discount is warranted for Fisker, which went public in 2020 , given it’s at an “earlier and more uncertain stage.” Babcock said the company has a lower-risk business model than others in the space given that contract manufacturing can be used, which can help mitigate challenges usually faced by electric vehicle startups and lower capital requirements. Still, he noted Fisker may need additional capital as the electric vehicle market gets crowded and the company tries to break into one of its most competitive segments: electric crossovers and SUVs. He said the company will also need at least $1 billion more to get to self-funding status. Tesla’s price cuts could be a harbinger for volume and profitability troubles for Fisker, Babcock warned. But Babcock used Bank of America’s framework for analyzing automotive-technology stocks, which looks at positioning and disruptive threats. Under this framework, the company meets enough criteria to make it “relatively compelling.” — CNBC’s Michael Bloom contributed to this report
