Fisker: Could This Heavily Shorted Stock Skyrocket?
With its stock price down over 45% over the last 12 months and short interest totaling 33% of its outstanding float, Fisker (NYSE: FSR) seems to be shunned by the market because of its heavy losses and business. That said, the company has some potential growth catalysts on the horizon. Let's dig deeper and see if this electric automaker is a long-term winner, or a dud.
2020 was a year of low interest and cheap capital as the Federal Reserve attempted to stimulate the economy in the wake of COVID-19 lockdowns. Fisker was one of many businesses to take advantage of this opportunity by going public through a reverse merger with a special purpose acquisition company (SPAC) even before generating revenue. Unfortunately, these types of listings have burned investors in the past because they allow speculative companies to bypass the traditional, and more rigorous, IPO process.
To make matters worse, starting in 2022, the Federal Reserve embarked on its fastest rate-tightening cycle in history, taking its benchmark interest rate from near zero to over 4.5% at the time of this writing. Higher rates are a double-whammy for Fisker because they increase the cost of capital throughout the economy while hurting demand for growth stocks by reducing the discounted future value of their projected earnings.
Source Fool.com
