The electric vehicle (EV) industry is growing rapidly around the world due to the cost stabilization of batteries, improving infrastructure, and government subsidies for buyers. These industry tailwinds should help the EV market reach $802.81 billion by 2027, demonstrating a CAGR of 22.6%.
The EV industry remains an attractive space for long-term investors even with ongoing supply chain disruption. EV stocks, represented by the Global X Autonomous & Electric Vehicles ETF (DRIV), returned about 13% over the past six months, outperforming the S&P 500’s 8% gains.
With this in mind, today, I will be analyzing two EV stocks: Tesla, Inc. (TSLA) and Fisker Inc. (FSR), to determine which is currently the better investment. Tesla, which is a pioneer of the EV industry, produces and sells electric vehicles, as well as energy generation and storage systems, across the globe. The company operates through two key segments: Automotive and Energy Generation & Storage. Over the past six months,Tesla stock soared more than 60%.
Founded in 2016, Fisker is engaged in the manufacturing and marketing of EVs in the U.S. FSR stock has lost 7% in the past six months.
On January 11th, Tesla reported that December sales for China-made EVs climbed to 70,847 units, which is the highest monthly rate since China’s manufacturing started. These figures represent respective growth of 34% and 348% on a monthly and year-over-year basis. Besides, Morgan Stanley analyst Adam Jonas raised the TSLA price target to $1,300 from $1,200, maintaining an Overweight rating.
On November 17th, Fisker released its SUV, Fisker Ocean, at the 2021 Los Angeles Auto Show. Fisker’s SUV has a lot of innovative features and a competitive pricing model. The base model, Ocean Sport, has a front-wheel-drive, 275 horsepower, and 250 miles of driving range, pricing at $37,499. The high-end model of Fisker’s lineup, Ocean Extreme, will cost $68,999. The company received plenty of the industry’s positive reviews, which can translate to a great demand for its vehicle.
Recent Financial Performance & Analysts Estimates
On October 20th, Tesla revealed its third-quarter earnings report. In Q3, Tesla’s total revenue increased 56.9% year-over-year to $13.76 billion, driven by higher Model 3 and Model Y sales, partially offset by fewer Model S and Model X sales. In addition, the company was able to beat revenue projections by $60 million. Furthermore, TSLA reported a Non-GAAP EPS of $1.86, topping Wall Street estimates by $0.25.
The EV pioneer improved its total automotive gross margin by 200 bps year-over-year to 30% because of the higher economies of scale in Shanghai’s Gigafactory, thus significantly decreasing the average Model 3 and Model Y costs per unit. In Q3, its total gross margin also increased to 27% from 24% as of 3Q2020.
Analysts expect TSLA’s EPS to improve 189.91% year-over-year in the fourth quarter to $2.32. Besides, the $16.61 billion consensus revenue estimate for the current quarter indicates a 54.64% growth year-over-year.
Fisker reported its last earnings results on November 3rd. FSR hasn’t recognized any material revenues yet as it is in the development stage. The company’s Q3 GAAP EPS stood at ($0.37), missing analysts’ expectations by $0.01.
When it comes to costs, Fisker’s general and administrative expenses came in 57% higher year-over-year at $10.27 million in Q3. Fisker’s research and development costs were $99.29 million compared to $3.4 million as of 3Q2020, mainly due to higher expenses related to Ocean and PEAR vehicle programs.
The company ended the third quarter with total cash of $1.40 billion. Its liquidity position remains strong, considering a cash burn rate of $160.38 million as of nine months ended September 30th, 2021.
Fisker’s EPS is expected to deteriorate in the fourth quarter of 2021 to ($0.47) from its year-ago value of ($0.05). In addition, analysts expect Fisker to realize its first significant revenues of $221.6 million in FY2022.
Comparing Options Market Sentiment
Taking a look at the February 4th, 2022 option chain for both TSLA and FSR, we can determine options market sentiment by analyzing the open interest levels. In TSLA’s case, the open calls/open puts ratio at the $1,050.00 strike price is 3.7x, showing a bullish options market sentiment. For Fisker, the open calls/open puts ratio at the $15.00 strike price stands at 0.34x, indicating a bearish market sentiment.
I believe Tesla is a clear winner here. The company continues to gain momentum in China, the biggest EV market in the world. Currently, Fisker is far from its first solid revenues and ever farther from profitability. At the same time, Tesla’s financials and forward growth rates are impressive. Finally, TSLA has a strong short-term options market sentiment.
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TSLA shares were trading at $1,040.79 per share on Wednesday morning, up $10.28 (+1.00%). Year-to-date, TSLA has declined -1.51%, versus a -3.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Oleksandr Pylypenko
Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist. More...
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