Shares of Fisker Inc. (NYSE:FSR) are trading down nearly 20% Tuesday morning after the electric automaker reported a 3Q earnings miss and announced a cut in production guidance.
Barclays reiterated their Underweight rating on Fisker, and cut their 12-month price target to $4.00 (From $5.00) following the “difficult 3Q print”.
Fisker reported 3Q revenues of $72M, missing the consensus estimate of $143M by nearly half. EBIT of -$100M also missed the consensus estimate of -$68mn. However, EBIT results were more in-line with Barclays’ estimate of -$93mn. EPS was reported at ($0.27), $0.05 below the consensus estimate.
FSR cut production guidance, narrowing estimates down to a range between 13,000 to 17,000 vehicles, down from the previous estimate of 20,000 to 23,000. A midpoint of 15,000, indicates an anticipated production of around 9,000 vehicles in the 4Q, nearly doubling the production rate seen in the 3Q.
While FSR seems to be making headway in ramping up production, management trimmed their 3Q forecast primarily to manage inventory and deliveries.
They're facing some logistics issues, causing a gap between produced and delivered vehicles. Analysts at Barclays believe the steadier production rate reflects the tough EV demand situation, at least to some extent.
“Put another way, making, selling, delivering, and servicing consumer vehicles is rather complex, not to mention accounting for and operating it. While FSR can likely solve these challenges in time, we believe it will come with a considerable uptick in headcount and spending requirements,” wrote analysts in a note.
To solve their logistic issues, analysts believe Fisker will likely require additional capital, and accordingly, further dilution.
In early July, FSR secured a funding deal of about $300 million through a $340 million 0% interest convertible note, due in July 2025. They also kept the option open for an additional $340 million through similar convertible notes. Later, in late September, FSR modified its arrangement with the investor, raising roughly $150 million through a comparable $170 million convertible note due in September 2025, with the potential to raise an extra $550 million.
These transactions address some immediate capital needs in the short to mid-term. However, analysts acknowledge that the dilution resulting from the note could pose a challenge to the stock over its term and upon conversion.
An overhang on the print was a delay in filing the 10Q due to FSR's inability to meet the planned Nov. 9th release. As a result, the reporting date was moved to Nov. 13th, and the filing of the 10Q was pending. Additionally, FSR disclosed a weakness in its internal controls over financial reporting.
While concerning, analysts expect that these challenges are likely specific to this instance. They may be attributed to management changes and growing complexities in a unique business model.
Analysts expect FSR will address and resolve these issues, returning to regular reporting in due course.
Shares of FSR are down 22.14% in mid-day trading on Tuesday.