On July 25, 2022, Faraday Future Intelligent Electric Inc. (FFIE) announced that it postponed the start of the production of its first vehicle, the FF 91 electric SUV. The company aims to kickstart its production by the third or fourth quarter of the current year.
FFIE is engaged in the design, development, manufacturing, engineering, sale, and distribution of electric vehicles.
The FF 91 electric SUV, unveiled in 2017, is yet to be produced. Electric vehicle startups face significant challenges in producing vehicles because of macroeconomic headwinds.
FFIE has estimated that it would use up $368 million from July 1, 2022, till the end of the fiscal year to launch its first vehicle, the FF 91. The company said it needs fundraising worth $325 million to supplement its current cash position. FFIE projects the need for additional funds by early September to continue operations.
The company also requires additional funds to ramp up production and generate revenues for the rest of 2022 and beyond. FFIE is trying hard to preserve its liquidity by reducing capital expenditure, extending payment cycles, etc.
FFIE also faces headwinds such as higher construction and labor costs, semiconductor chip shortages, tariffs, raw material inflation, cost overruns, etc.
The stock has declined 80.2% in price year-to-date and 89.3% over the past year to close the last trading session at $1.05. It is currently trading 90.8% below its 52-week high of $11.50, which it hit on September 21, 2021.
Here’s what could influence FFIE’s performance in the upcoming months:
Disappointing Financials
FFIE’s operating expenses increased 396.4% year-over-year to $137.46 million for the second quarter ended June 30, 2022. The company’s net loss widened 168.5% year-over-year to $141.69 million.
Its loss per share widened 37.5% year-over-year to $0.44. In addition, its total assets declined 35.1% to $588.24 million from $907.43 million for the fiscal year ended December 31, 2021.
Mixed Analyst Estimates
FFIE’s EPS for fiscal 2022 and 2023 is expected to be negative. Its revenue for fiscal 2023 is expected to increase 727.6% year-over-year to $300 million.
Stretched Valuation
In terms of forward EV/S, FFIE’s 9.37x is 758.5% higher than the 1.09x industry average. Likewise, its 9.50x forward P/S is 1,001.4% higher than the 0.86x industry average.
Weak Profitability
FFIE’s trailing-12-month ROTC is negative compared to the 6.95% industry average. Likewise, its trailing-12-month ROA is negative compared to the 5.19% industry average.
POWR Ratings Reflect Bleak Prospects
FFIE has an overall F rating, equating to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. FFIE has an F grade for Value, in sync with its stretched valuation.
It has an F grade for Quality, consistent with its lower-than-industry profitability.
FFIE is ranked #57 out of 65 stocks in the D-rated Auto & Vehicle Manufacturers industry. Click here to access FFIE’s ratings for Growth, Momentum, Stability, and Sentiment.
Bottom Line
FFIE is trading below its 50-day and 200-day moving averages of $3.09 and $4.10, indicating a downtrend. The company is facing strong headwinds currently. In addition, failure to garner additional funds may hamper its operations.
Given its weak financials, stretched valuation, and negative profitability, it could be wise to avoid the stock now.
How Does Faraday Future Intelligent Electric Inc. (FFIE) Stack Up Against Its Peers?
FFIE has an overall POWR Rating of F, equating to a Strong Sell rating. Therefore, one might want to consider investing in other Auto & Vehicle Manufacturers stocks with an A (Strong Buy) or B (Buy) rating, such as Stellantis N.V. (STLA), Volkswagen AG (VWAGY), and Bayerische Motoren Werke Aktiengesellschaft (BMWYY).
FFIE shares fell $0.01 (-0.99%) in after-hours trading Tuesday. Year-to-date, FFIE has declined -81.02%, versus a -17.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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