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Fisker Has Done Half of Its Homework Really Well

Fisker (NYSE:FSR) stock remains the same compelling investment it was following its Feb. 16 earnings announcement. Well, sort of. It maintains the same overweight rating it had on Wall Street. And there are reasons to believe those could rise…

Fisker (NYSE:FSR) stock remains the same compelling investment it was following its Feb. 16 earnings announcement. Well, sort of. It maintains the same overweight rating it had on Wall Street. And there are reasons to believe those could rise in the near future along with its stock price. 

Source: Eric Broder Van Dyke / Shutterstock.com

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When I say that Fisker remains compelling, I’m actually referring to the Fisker Ocean. The further along things go, the better that project seems to look.

But at the same time I think investors are going to ask some important questions beyond the Ocean. That could spell trouble for FSR stock moving forward. 

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The Ocean

Fisker stock’s upward movement on earnings has everything to do with its Ocean SUV. Everything continues to remain on track for that project. 

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The company unveiled its production intent model of the Ocean on Nov. 17. That model was well-received, winning the inaugural THE ZEVAS award at the LA Auto show. 

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More importantly, Fisker reaffirmed that production will begin on Nov. 17, 2022 in the earnings announcement. Those earnings also reaffirmed demand for the Ocean. 

Demand is High

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As of Feb. 14, there are more than 30,000 reservations for the Fisker Ocean. Those reservations also include more than 1,600 fleet reservations. Those reservations are a clear signal that demand is strong for the Fisker Ocean. 

Fisker stated that the $1.2 billion in 2021 ending cash will be sufficient to fund production and launch of the Ocean in November. Investors should reward Fisker for its progress in bringing the Ocean to market. It remains one of the better (special purpose acquisition company)SPAC-funded EV (electric vehicle) stories thus far. 

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Remember, Fisker is relying on Magna International (NYSE:MGA) to manufacture the Ocean. Critics have nearly unanimously cheered that decision as it frees Fisker to market and sell its inaugural vehicle post-SPAC. Magna International’s production will begin at the company’s Graz, Austria facilities. Fisker will rely on Magna’s strong track record as a vehicle manufacturing outsourcing firm which would otherwise be an extreme undertaking for the company. 

As we move nearer Nov. 17, 2022, the decision looks better and better. I believe the surging reservation numbers are a great testament to that. That’s really strong news for Fisker. However, I see other reservation news as less positive.

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Fisker PEAR

Fisker also opened reservations for the Fisker PEAR to retail customers and noted a potential order in the near future from a large commercial customer. On the face of it that’s great news. The Ocean seems to be in position to deliver and Fisker is getting things rolling on its second vehicle, the PEAR. 

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But it raises a question: Will outsourcing its second vehicle work for Fisker? I’m honestly pretty doubtful about the PEAR. Magna International will not be handling the manufacturing of the PEAR, only the Ocean. 

Instead, it will be manufactured by Foxconn, the Taiwanese electronics manufacturer. Foxconn will build the PEAR at the Lordstown Assembly plant in Ohio it purchased late last year. 

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Customers that buy the Ocean are likely to receive a quality product reliant upon Magna International’s strong pedigree. When the PEAR is released in 2024 there’s no telling what to expect. 

Foxconn is famous for making iPhones, not vehicles. This is a completely new venture for the firm. If that makes you wonder aloud why Fisker chose Foxconn, you wouldn’t be the first. 

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The Takeaway

The narrative surrounding FSR stock remains the same: It should move upward due to the tailwinds the Ocean is providing. The project was well thought out, and seems to be well executed. What happens after that is much less clear.

If you’re like me, you wonder if Foxconn makes any sense at all. You’ll probably also wonder why Fisker didn’t choose a firm like Magna International instead. 

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On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing. 

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