Electric vehicle manufacturer Faraday Future Intelligent Electric Inc. (FFIE) has been making headlines recently with the announcement of its flagship model, the FF 91, but its financial troubles and delivery delays remain a concern. In this article, I’ll discuss why the stock is taking a nosedive.
FFIE had announced in its quarterly report that is relying on a previously announced $135 million to meet its March 2023 production deadline for its flagship model, the FF 91 Futurist Alliance, but had only received $111.6 million so far, with the remaining $38.4 to $58.4 million expected to arrive soon.
While FFIE recently announced the start of production for its flagship model, the FF 91 Futurist Alliance, the company also updated a delay in the start of deliveries of its FF 91 vehicle due to some of its suppliers being unable to meet their timing requirements.
FFIE has a three-phase delivery plan starting at the end of May 2023, but only specific customers will receive the initial deliveries. The company's ability to deliver to more customers depends on its ability to secure additional funds. Moreover, the original date for the event was initially moved from late 2022 to April of this year.
In addition, despite the recent surge in volume, FFIE has lost 26.1% over the past month to close the last trading session at $0.31. It has lost 40.9% over the past six months and 93.3% over the past year.
Here is what could shape FFIE’s performance in the near term:
Weak Financials
During the fiscal year that ended December 31, 2022, FFIE’s loss from operations came in at $450.99 million, increasing 27.3% year-over-year. The company’s net loss grew 6.9% from the prior year to $552.07 million, while its net loss per share stood at $1.50.
In addition, its total assets declined 43.8% year-over-year to $510.29 million, compared to $907.43 million for the fiscal year that ended December 31, 2021.
Stretched Valuations
FFIE’s forward EV/Sales multiple of 1.88 is 70.4% higher than the industry average of 1.11x. Its forward Price/Sales of 1.52x is 77.9% higher than the industry average of 0.85x.
Poor Profitability
FFIE’s trailing-12-month negative ROCE, ROTC, and ROTA of 147.14%, 55.52%, and 108.19% are lower than the industry averages of 11.86%, 6.35%, and 4%, respectively.
POWR Ratings Reflect Bleak Prospects
FFIE has an overall rating of F, equating to Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different 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 Stability, in sync with its 60-month beta of 1.99.
Its D grade for Value and Quality is consistent with its higher-than-industry valuation multiples and poor profitability.
In the 58-stock Auto & Vehicle Manufacturers industry, FFIE is ranked #47.
Click here to access additional POWR Ratings for FFIE (Growth, Momentum, and Sentiment).
Bottom Line
The stock is currently trading below its 50-day and 200-day moving averages of $0.52 and $1.17, indicating a downtrend.
Moreover, the company witnessed a declining bottom line in the previous fiscal year 2022. In addition, analysts expect FFIE’s EPS to remain negative in 2024 as well.
Despite the company's ambitious plans for new flagship models, FFIE's weak financials, stretched valuations, and poor profitability suggest its near-term performance could be dampened. Therefore, the stock might be best avoided.
Stocks to Consider Instead of Faraday Future Intelligent Electric Inc. (FFIE)
The odds of FFIE outperforming in the weeks and months ahead are significantly compromised. However, there are many industry peers with impressive POWR Ratings. So, consider these three stocks rated A (Strong Buy) from the Auto & Vehicle Manufacturers industry instead:
Stellantis N.V. (STLA)
Honda Motor Co. Ltd. ADR (HMC)
Mercedes-Benz Group AG (MBGAF)
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FFIE shares were trading at $0.27 per share on Friday afternoon, down $0.04 (-13.61%). Year-to-date, FFIE has declined -6.99%, versus a 7.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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