It’s another sad day for the electric vehicle industry as the Fisker (FSR) stock price imploded. It collapsed by more than 40% on Friday and reached its all-time low. In a sad state of things, a company that was trading at $32 in 2021 is now going for just $0.40. In other words, $10,000 invested in Fisker at its peak would now be worth $117.
Going concern risksFisker stock price has been in a strong freefall for months and the situation has moved from bad to worse. In a statement on Thursday, the company announced that its revenue for the fourth quarter came in at $200.1 million, a $128 million increase from the third quarter.
These headline figures are impressive considering that the company started to manufacture and ship vehicles in the second half of 2023. However, a look beneath the surface shows that the situation is not good.
For example, Fisker’s gross margin came in at minus 35% while its total loss from operations surged to about $103 million. Its total net loss for the quarter was $463 million, meaning that the company is incinerating money at a fast pace.
The biggest concern is that the company may not be able to continue as a going concern since it is facing substantial liquidity issues. As such, while the company has over $325 million in cash, this amount will be depleted soon. In a statement, Fisker’s CEO said:
“Our cash position fluctuates based on a variety of factors. Since December 31, 2023, there has been a reduction — further reduction in our cash due to ongoing operations.”
All this means that the company may struggle to hit its annual target for the year. It expects to sell between 20,000 and 22,000 vehicles this year. Its vehicles are not cheap, with the target price being between $56,000 and $62,000. With the industry going through a price war, we can’t rule out a situation where these prices fall.
Is it safe to buy Fisker stock?
Therefore, some opportunistic investors may feel that the Fisker stock price has become a bargain. Besides, it has moved from a blue-chip EV company into a penny stock.
However, at this stage, there is a likelihood that the stock will continue falling as bankruptcy risks remain. The only hope is that the company could become a victim of a short squeeze since it is one of the most shorted stocks in the US. Its short interest stands at over 40%.
Fundamentally, the company faces substantial risks as the EV industry gets saturated. Just this week, the Biden administration announced that it will start investigating Chinese EVs for security reasons. This is a sign that American automakers are concerned about inflows of quality Chinese vehicles.
Therefore, it is risky and expensive to short Fisker at this point since it can be a target of a short squeeze. It is also difficult to buy the company because it could go bankrupt soon.
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