Citi sees Fisker rallying 60%, calls it a high risk car of the future play

Published Wed, Nov 25 20208:19 AM ESTUpdated Wed, Nov 25 202010:52 AM EST

(This story is for CNBC Pro subscribers only.) Citi is betting on newly public speculative electric vehicle start-up Fisker as a "car of the future" play, according to the firm's analyst. Citi initiated coverage of the car company with a buy rating and a $26 per share 12-month price target, implying a 62% rally from Tuesday's closing price of $15.97 per share. The Wall Street firm also acknowledged it as a high risk company, which has yet to produce a vehicle and is not expected to be profitable in the near future. Shares of Fisker soared more than 19% on Wednesday. "As a pre-revenue company, Fisker is clearly a higher-risk investment proposition. But we like the [long term] fundamental story," Citi analyst Itay Michaeli told clients. Shares of the electric vehicle start-up are up more than 75% since its initial public offering in late October, joining a robust group of EV-plays like Tesla, Nikola and Nio. Fisker went public through a merger with Spartan Energy Acquisition Corp., a special purpose acquisition company, or SPAC, backed by Apollo Global Management . The SPAC deal is expected to provide Fisker with more than $1 billion to bring its first product, the Fisker Ocean, to production in late 2022. Citi said Fisker is targeting the right segment by focusing on the SUV market for the Fisker Ocean. The firm also said Fisker's price point, between $38,000 and $69,000, are in the right range. "We see significant upside potential in the company's future entry into EMaaS/flex-leases—a similar model as the subscription model we've long written about, and one that could substantially expand the [total addressable market] from today's largely 1x transactional business to lifetime vehicle revenue," said Michaeli. Fisker is building the Fisker Ocean with partner Magna International, which makes the electric-car maker uniquely asset light, said Citi. "Fisker is production asset-light having secured a strong partner in Magna, which de-risks many typical 'OEM' hurdles but allows Fisker to retain control of key areas within software/UI/design," added Michaeli. Citi got its $26 per share price target for Fisker by keeping in mind the volatile EV valuations. "We do assign a High Risk rating to reflect the significant risks that are associated with a pre-revenue company at this stage, but we view the 12-month risk/reward to be attractive in the context of our thesis and valuation approach," said Michaeli. — with reporting from CNBC's Michael Bloom.

The New York Stock Exchange welcomes Fisker Inc. in celebration of its initial public offering on Nov. 9, 2020.

Source: NYSE

(This story is for CNBC Pro subscribers only.)

Citi is betting on newly public speculative electric vehicle start-up Fisker as a "car of the future" play, according to the firm's analyst.

Citi initiated coverage of the car company with a buy rating and a $26 per share 12-month price target, implying a 62% rally from Tuesday's closing price of $15.97 per share.