The burgeoning EV industry has led to the emergence of multiple small players, each company bringing something new to the table. The industry melt-up has led to many companies witnessing a stellar price momentum despite having a blank balance sheet. Earlier this year, Nikola Corporation (NKLA) became the talk of the town with its electric truck designs and features, as many dubbed the company to be the ‘Tesla of Trucking.’ However, the stock has been on a pullback since then, as several fraud allegations have raised questions regarding the ingenuity of the company and its vehicles.
Fisker, Inc. (FSR) is a relatively new start-up in the EV space, spending less than a month since its market debut. However, the company managed to rack up double-digit gains over this short span, through strategic partnerships and expansions. FSR’s impressive performance has made it one of the most promising start-ups in the EV space, providing tough competition to NKLA.
FSR has gained 75.6% since its market debut on October 30th, while NKLA returned 27.3% over the past month. NKLA hit its 52-week high of $93.99 on June 8th, after just 4 days of trading, but declined 71.9% since then.
But which stock is a better buy now? Let’s find out.
NKLA went public on June 4th through a reverse merger with blank check company Vector IQ. It is currently constructing its manufacturing facilities in Coolidge and Arizona, following which production should begin. The company partnered with IVECO (owned by CNH Industrial) for a $250 million capital infusion in exchange for approximately 7.11% stake. This should allow NKLA to become a leading Original Equipment Manufacturer (OEM) in the future.
On September 8th, NKLA entered into a strategic partnership agreement with General Motors Company (GM) for $2 billion in exchange for an 11% equity stake. This deal is expected to help NKLA cut down approximately $5 billion in costs over the next 10 years. Earlier this year, NKLA announced the sale of 23.90 million shares following an exercise of the warrant.
However, following some fraudulent allegations against CEO and founder Trevor Milton, he stepped down in September.
FSR, on the other hand, is a relatively new stock making its debut last month.
FSR went public through a SPAC with Apollo Global Management affiliated Spartan Acquisition Energy Corporation on October 30th, making it one of the newest players in the electric vehicle market. The company has generated $1 billion in cash through the merger, including $500 million through common stock PIPE funding. The stock has gained 94.6% since its debut.
FSR is expected to launch a Fisker Ocean vehicle in 2022, and three vehicles by 2025. The company recently partnered with auto supplier Magna International to supply the vehicle platform and build its Ocean SUV.
On October 21st, FSR announced a strategic partnership with Viggo Sign for the delivery of 300 vehicles in the fourth quarter of 2020. Earlier, in July, FSR announced entering into advanced talks with Extreme E for a potential strategic partnership and works team entrance.
Recent Financial Results
NKLA reported a net loss from operations of $117,299 in the third quarter ended September 2020. However, the company maintained a strong liquidity position with a cash balance of $908 million and a restricted cash balance of $15 million.
NKLA focused on developing its manufacturing facility in Arizona over this quarter, which is currently on the path to becoming operational by the end of next year. The company plans to begin trial production by the third quarter of 2021 in the Coolidge manufacturing facility in Arizona.
On the other hand, FSR is expected to commercially launch its EVs in 2022.
Past and Expected Financial Performance
NKLA’s EBITDA rose 19.6% year-over-year, while EPS grew 63.6% year-over-year. Comparatively, FSR, EBITDA, and EPS increased 210.9% and 133.6% respectively, year-over-year.
NKLA’s EPS is expected to rise at a rate of 20.6% per annum over the next five years. Analysts expect revenues to increase 48,870% in 2021.
On the other hand, FSR’s EPS is expected to grow at a rate of 10% per annum over the next five years. Analysts expect revenue to rise by 22.2% next year.
Both NKLA and FSR have a long way to go to become profitable. While neither has begun commercial production and supply of their proprietary EVs, NKLA’s solar panel business allowed the company to generate adequate revenues over the past quarters. It’s trailing 12-month revenue of $144,000 is significantly higher than FSR’s no revenues.
However, NKLA plans to discontinue its solar panel business in the future to concentrate on the electric trucks segment.
FSR is rated “Neutral” in our proprietary POWR Ratings system, while NKLA is rated “Sell”. Here’s how the four components of overall POWR Rating are graded for both these stocks:
NKLA has an “A” for Industry Rank, “D” for Trade grade and Peer grade, and “F” for Buy & Hold Grade. It is currently ranked #25 out of 33 stocks in the Auto & Vehicle Manufacturers group.
FSR has an “A” for Industry Rank, “B” for Trade Grade, “C” for Buy & Hold Grade, and “D” for Peer Grade. It is currently ranked #27 out of 33 stocks in the same group.
Despite NKLA’s efforts to revive its tainted market image because of fraudulent allegations, investors are still skeptical about the efficacy and sustainability of its products. With no concrete evidence regarding the performance and efficiency of its hydrogen-powered trucks, and no similar products available in the market, NKLA is an extremely risky investment bet right. FSR, on the other hand, though relatively more stable, has yet to prove the dexterity of its electric cars, which are launching next year. Thus, it would be wise to wait for a couple of months for FSR’s prototype vehicles to hit the market, before investing in the company.
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NKLA shares were trading at $27.72 per share on Monday morning, up $1.34 (+5.08%). Year-to-date, NKLA has gained 168.61%, versus a 12.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don’ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More…