Shares of Vietnamese EV start-up VinFast Auto have experienced significant turbulence in recent days, with no clear explanation for the sudden movements. As investors eagerly await a return to stability, it is crucial to consider what lies ahead for both the company and its stock.
On Thursday, VinFast (ticker: VFS) stock closed down nearly 27% at just under $18 per share. Meanwhile, the S&P 500 and Nasdaq Composite experienced a more modest decline of 0.3% and 0.9% respectively. This marked the seventh consecutive day of declines for VinFast shares, eroding approximately $150 billion in market value.
In early August, the shares were valued at around $10. However, a merger with a special purpose acquisition company on August 10th catapulted the price to $93. The stock symbol was subsequently changed to “VFS” on August 15th.
While such unexplained fluctuations may unsettle many investors, there are those who are drawn to the volatility associated with VinFast stock. In fact, its shares have been moving up or down by an average of 40% per day since the symbol change.
However, as time goes on, investors will inevitably shift their focus to evaluating the stock’s fundamentals – a task that will prove challenging.
Valuations for EV start-ups vary significantly, and VinFast’s situation is no exception. Taking its debt into account, the company is currently trading at approximately 22 times its projected 2023 sales. In comparison, Lucid (LCID) is valued at about 14 times its potential sales, while Rivian Automotive (RIVN) is valued at approximately four times.
The future direction of VinFast and its stock remains uncertain. Nevertheless, both seasoned investors and newcomers alike must brace themselves for further twists and turns as they navigate this exciting yet volatile market.
Potential for Profitability in Electric Vehicle Start-ups
Several start-ups in the electric vehicle (EV) industry are generating significant buzz due to their capacity to produce hundreds of thousands of vehicles annually. However, despite their potential, none of these companies have achieved profitability yet.
When it comes to evaluating the future outlook for these start-ups, Wall Street has not been much help. As of now, no analyst covers the stock of these EV companies. However, ratings from brokers are expected to arrive soon. It’s worth noting that it took several weeks for Lucid, another EV company, to receive its first rating after completing its SPAC merger.
Predicting how Wall Street will react to these companies remains uncertain. Even analyzing stock charts does not offer much insight. “That’s a wild chart,” remarks CappThesis founder and market technician Frank Cappelleri. He explains that technicals, such as charts and moving averages, hold little value in situations like this. They do not provide a clear understanding of investor sentiment or indicate when a stock may become attractive or fall out of favor.
Considering VinFast, the stock’s history does not present a coherent narrative yet. Prior to August, the shares did not garner much attention and merely reflected the cash value of the SPAC that merged with VinFast. However, in a few months, analysts are likely to provide more comprehensive assessments, consequently contributing more useful data to the stock’s chart. This increased knowledge could potentially lead to less volatile trading. But at this point, making any definitive statements would be premature.
In summary, the future of these EV start-ups remains uncertain. While their capacity for mass vehicle production is impressive, current evaluations by Wall Street analysts are unavailable. The charts do not provide much guidance either. Only time will tell how these companies will fare in the evolving EV market.
By Al Root
