Fisker Inc. Goes On Alert For Short-Squeeze Potential
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Is The Squeeze In Fisker Inc. About To Begin?
We put Fisker Inc. (NYSE: FSR) on watch for a short-squeeze just the day before it released its Q1 earnings and it already looks like the squeeze could be on. The company reported a mixed quarter but one in which outlook was upheld, targets were maintained, and progress was reported and all in the face of a 28% short-interest. While Fisker is still in its pre-production/pre-revenue phase it continues to gain validation through its relationships and that will be what drives shares higher. Relationships with manufacturers like Foxconn give substance to the promise of future revenues above and beyond the company’s core business. By our calculations, this company should start bringing in money by late next year and could easily surprise the market with its initial strength.
Fisker Reports Wider Than Expected Loss, Outlook Good
Fisker’s Q1 report is more of an update on operational progress than anything else and by all accounts the updates are good. The only bad news is the Q1 GAAP loss widened to $0.63 and missed the consensus by $0.46. This is due in part to the recently announced Pear Project with Foxconn as well as increased spending in the buildup to Ocean production. To that end, the company raised its full-year guidance for operating expenses by $30 million to include the cost of Pear which is already deep in progress and expected to begin production of its vehicle by late 2023.
In regards to the company’s flagship model the Ocean SUV, Fisker says it is on track to begin deliveries late in 2022. Recent activities include materials sourcing, price visibility for materials, battery suppliers, and realization of cost-synergies across the Ocean, Pear, and FM29 platforms. The company also revealed it has more than 16,000 reservations for the Ocean which is quite a feat considering how long it will be until deliveries begin. In addition, the company reports interest from outside the traditional SUV market and suggests its addressable market may be larger than anticipated.
Looking at the company from the balance sheet angle, it appears to be well-funded and has virtually no debt to speak of. The company reports $985 million in cash and securities which is down only $6 million from the end of the year and there’s more. Fisker reports it has redeemed all outstanding public warrants on a cashless basis. The redemption resulted in 3.6% dilution or about half if redeemed for cash exhibit the company’s faith in the balance sheet.
The Analysts Are Mixed But See This Stock Trading Higher
The analyst’s community is generally bullish on this stock but there are a few bears out there still. Of the 11 current ratings, there are 2 holds and 2 sells but nonetheless, the consensus estimate is well above the current price action. At $26.30, the consensus target implies more than 125% of upside potential and we think this target will ultimately prove to be too low. There’s been no chatter since the Q1 release but we think it’s only a matter of time before the consensus rating and price target begin moving higher
The Technical Outlook: Fisker Appears To Be At A Bottom
Price action appears to be at a bottom regardless of the potential for a short squeeze. The stock is trading above a potentially strong support level at the $10 range and moving higher in the wake of the Q1 report. The indicators support the idea of higher prices as they are consistent with support and showing a bullish entry signal with today’s action. While we can’t say short-covering will start for sure we can say it looks like this stock will at least retest the $13 level near the short-term moving average. If price action gains momentum or moves above the EMA we just may see a very strong short-covering rally begin.
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