The electric vehicle (EV) industry, once bustling with promise, now resembles a chaotic traffic jam. Even the EV titan, Tesla (TSLA), witnessed a decline in Q1 deliveries – highlighting a broader slowdown in electric car demand.
For lesser-known startups, the road has been rockier, with many facing imminent bankruptcy or folding altogether.
Vietnam’s VinFast (VFS), which made a flashy entrance in the U.S. stock market via a SPAC merger last year, saw its shares skyrocket to dizzying heights, clinching a market cap that dwarfed industry stalwarts like Ford (F) and General Motors (GM).
Fast forward to 2024, and VFS is in a tailspin, languishing as a penny stock at its record lows. Let’s delve into the tumultuous 2024 forecast for this EV upstart.
VinFast Stock Forecast: Bullish Analyst Sentiments
All four analysts tracking VinFast rally behind a “Strong Buy” rating. Their average price target of $10.50 includes a hefty 156% upside from recent closing prices. The most optimistic target, at $13, envisions a tripling of the current valuation, while even the most conservative target of $8 foreshadows a near doubling of the stock price.
Though analyst coverage is scarce, their collective optimism shines through in these price projections. However, the market’s trajectory appears at odds with this rosy outlook for VFS.
Understanding VinFast’s Stock Downturn
The downward spiral in EV stocks has been palpable, and Vinfast is no outlier, plummeting over 51% thus far in 2024. This trend mirrors the declines seen in peers like Rivian (RIVN) and Lucid (LCID), with Chinese EV heavyweights such as Xpeng (XPEV) and NIO (NIO) also reeling.
The industry faces a glut of supply, leaving sales lagging expectations and sparking a fierce price war. This mismatch spells trouble for profit margins, exacerbating losses and cash hemorrhages among emerging players.
VinFast’s Cash Conundrum
VinFast hemorrhaged $3.3 billion in cash in 2023 and $2.2 billion in 2022, with a meager $168 million in cash reserves by the end of 2023. The company hinges on lifelines from its parent firm, Vingroup, touting unwavering support in corporate materials.
Parallels can be drawn to Lucid Group, propped up by Saudi Arabia’s PIF, yet barely afloat despite the sovereign wealth fund’s deep pockets.
Decoding VinFast’s Pros and Cons
VinFast presents a mixed bag: a significant portion of its sales service a rental firm tied to its parent. Questions loom over its product’s reception, with one model, VF8, failing to dazzle critics compared to competitors.
The company eyes the SUV market, offering diverse options in different price ranges. Rumors swirl around a budget-friendly mini car, potentially tapping into the federal EV tax credit with a production site in North Carolina on the horizon. Plans for CKD plants in India and Indonesia may boost market reach amid hurdles faced by Chinese EV contenders.
Trading at a premium multiple compared to rivals, VinFast struggles to carve a unique niche in an increasingly crowded EV arena. With competition intensifying, investors may find safer bets elsewhere amidst the industry shakeup.