Why Fisker stock fell again on Monday

stocks of electric car companies fisker (FSR -7.22%) Trading on Monday slumped, falling 8.1% by 2:30pm ET due to negative reports from Wall Street firms.

Early Monday morning, Evercore ISI’s Chris McNally downgraded Fisker stock from Outperform (Sell) to Hold. As TheFly.com reported, RF Lafferty analyst Jaime Perez quickly increased the company’s price target on Fisker by lowering it from $7 per share to $3 per share.

What Wall Street Says About Fisker

That wasn’t the news every bad. Lafferty’s new price target of $3 per share is actually 50% higher than the $2 target Evercore assigned to Fisker stock and almost 100% higher than Fisker’s current stock price of $1. Lafferty also maintained a Buy rating on the stock.

But still, the news was bad enough.

As both analysts noted, Fisker recently reduced its production targets for this year and now believes it will produce just 10,000 electric vehicles in 2023, instead of the 13,000 to 17,000 it previously predicted. And even Lafferty, who continues to recommend the stock, acknowledged that 2024 will be similarly difficult for Fisker, with delivery delays likely to continue and an estimate for earnings before interest, taxes, depreciation, and amortization (EBITDA) cut from $174 million. I did. It fell to $103 million.

Evercore was much more blunt in its assessment. Fisker faces a “very precarious tightrope of execution, brand risk, capital raising and dilution.” There is little hope that the company will be able to compete with large EV producers like Rivian and Lucid, much less with Tesla, the undisputed leader. So, as Evercore says, “It’s time to throw in the towel.”

Is Fisker stock a sell?

Nevertheless, Evercore ultimately did not give up. At least I didn’t give up until the end. Instead, Evercore rates Fisker stock a Hold and assigns it a $2 price target that suggests the stock may actually rise rather than fall next year. In fact, if you take Evercore’s rating at face value, analysts think Fisker stock could actually rise more than 25% over the next 12 months.

So what should investors do, given these mixed signals from Wall Street? Are you hoping to own Fisker stock? Do you buy more stocks in the hope that they will double? Or… sell and buy something better than Fisker?

It really depends on how much risk you can take.

On the one hand, when we look at Fisker, we see a company with a market capitalization of $600 million, with net debt of over $600 million, no profits, and a cash burn rate of over $800 million. word. On the other hand, most analysts on Wall Street still predict that Fisker could become profitable as early as 2025. If they are right, and in terms of the size of profits Fisker will earn $0.29 per share in 2025, this is what it looks like: The stock trades for only about five times its earnings after two years.

Ultimately, what I’m trying to say is that Fisker still has a chance to succeed. But I still wouldn’t bet on it. When it comes to Fisker stock, I think discretion is the better part of its value.