Is Faraday Still Worth Buying?
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After repeated delays, $Faraday Future Intelligent Electric Inc. (FFIE.US)$ finally released its annual report for 2023 after the U.S. stock market closed on May 28th, local time. According to the data, Faraday Future’s total revenue for the year 2023 was only $800,000, with a net loss of $432 million.
During the earnings call and in subsequent recordings, the company's senior management pessimistically stated that due to various reasons, the company may never be able to achieve or maintain profitability. As of the close of May 29th, the company's stock price had plummeted by 61.7%, currently at only $0.44 per share, reflecting investors' concerns about the company's long-term profitability.
As a startup in the new energy vehicle industry, Faraday Future's dismal financial report has attracted widespread market attention. Against the backdrop of the rapid development of the new energy vehicle market, the performance of Faraday Future not only relates to the company's own survival and development but is also seen as a microcosm of the intense competition in the new energy vehicle market.
Let us now delve into the company's latest financial report for an in-depth analysis and discuss its current performance and future prospects.
Ⅰ. Dismal Electric Vehicle Sales, Delivering Orders May Be a Challenge
Faraday Future is an emerging growth-oriented new energy vehicle manufacturer whose main business is the manufacturing and sale of smart, connected, high-end electric vehicles. The company's core product is the FF 91 series electric vehicle, a luxury intelligent electric SUV targeted at the high-end market, with a starting price of $309,000, positioned as "Ultimate Intelligence, Extreme Luxury."
However, in the financial report for 2023, Faraday Future's automotive business did not perform as well as expected. The company's total automotive sales revenue was only $784,000. Although this was a significant breakthrough compared to the zero revenue in 2022, the total cost of sales for the year rose from zero to $43 million, more than 50 times the revenue, indicating significant cost pressure in product sales.
In 2023, the company only successfully sold 4 FF 91 Futurist vehicles and rented out 6 vehicles of the same series. Compared to other competitors in the industry, this number is too insignificant and far from the life-and-death threshold of 10,000 units. In addition, Faraday Future received a total of 303 pre-orders in 2023. While this news shows the attractiveness of the company's high-end electric vehicles, the uncertainty of pre-orders also poses a risk to the company's development.
As is well known, the automotive industry is one with strong scale effects, and it is normal to have substantial differences between initial investment costs and sales volume. Only after reaching a certain scale of sales can a company hope to achieve rapid revenue growth and gradually reduce its cost ratio.
The key issue for Faraday Future is that the company's electric vehicles are sold to the wealthy, so it is unlikely to gain a customer base among ordinary consumers and can only rely on higher Average Selling Price (ASP) per vehicle to generate revenue. However, from this financial report, it is evident that the wealthy are not buying into the company's vehicles, with sales remaining in single digits. Unless the company's marketing strategy achieves significant results, the likelihood of future performance recovery is minimal.
Ⅱ. Continuous Net Losses, Struggle to Maintain Operations
From a profitability perspective, Faraday Future's financial condition is quite severe. The company's operating loss for 2023 was $286 million, a 34.55% decrease from the previous year's $437 million; the total net loss for this year was $432 million, a 28.24% reduction from the previous year's $602 million, but the scale of the loss remains huge.
Furthermore, the company explicitly stated in its financial report that due to the many unforeseen expenses that arise during the production and development of electric vehicles, and the potential difficulties and delays when delivering the FF91 series, the company may never be able to generate sufficient revenue to sustain its operations. This pessimistic forecast further exacerbates market concerns about the company's future development.
Ⅲ. Negative Cash Flow, Valuation and Shareholder Returns in Question
Faraday Future is often referred to by investors as a "meme stock," with the company chairman Jia Yueting's statements on social media always attracting considerable attention, and its stock was once pursued by retail investors on internet and social media platforms.
However, such extreme stock price fluctuations reflect market speculation rather than improvements in the company's fundamentals. Compared to the hot new energy vehicle market in China, Faraday Future has long been out of the public eye. After all, Faraday Future, which sold only a few cars throughout the year, really has no capacity to "get a share of the pie," whether in a technology war or a price war.
Surprisingly, with no positive news on the horizon, the stock price of Faraday Future surged from $0.048 per share to a peak of $3.9 per share within the week from May 13th to May 17th, an increase of 8,380%. Even after a correction over the past week, as of the close of the U.S. stock market on May 29th, the stock price of Faraday Future for May still showed an increase of over 900%. However, after the release of this financial report, the company's stock price plummeted by 62% after hours, revealing investors' concerns about the company's long-term profitability.
Chart: FF stock fluctuation in May
Additionally, during the earnings call, the company did not mention any plans for stock buybacks or dividends. Considering the company's continuous losses and the sustained negative free cash flow on its balance sheet, it is estimated that its valuation and shareholder return capacity will continue to face significant challenges.
Ⅳ. Conclusion
In summary, Faraday Future's performance in 2023 was extremely poor. The company faces significant difficulties in its core business, profitability, valuation, and shareholder returns. Although the overall new energy vehicle market is showing strong growth momentum, if Faraday Future wants to gain a foothold in this highly competitive market, it will have to resolve its internal cost control problems, adjust product positioning, enhance product competitiveness, and establish a more robust image in the capital market.
Previously, Nasdaq has issued multiple delisting warnings to Faraday Future. On April 18th, Faraday Future failed to submit its 2023 financial report on time, which Nasdaq considered non-compliant with listing regulations. On April 24th, Nasdaq again stated that the company's stock price had not exceeded $1 per share for the past 10 consecutive trading days, mandating its delisting.
Although on May 29th, the company's chairman Jia Yueting announced on Weibo that Nasdaq had approved FF's application to continue trading, if the company continues to maintain the dismal operating conditions presented in this financial report in 2024, it will undoubtedly face operational difficulties, insufficient capital turnover, and a very high risk of bankruptcy and liquidation. As the company's senior management stated, FF may never be able to achieve or maintain profitability. Therefore, investors are advised to invest cautiously in the company to avoid unnecessary asset losses.
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NoNo444 : No report on short selling?
Dally D : Good intel drop very unbiased.
102710538 : What's more, it's not about shorting; it's deceptive
Iakul : Good write up. Just a minor correction, listing regulations are separate from each other. FFIE’s approval to continue trading is in regards to their failure to submit their 2023 financial report in time. They are still on the block for failing to maintain a minimum share price.
porkpirate : BUY AND HODL!!! LFG!!!!
Bird007 : Definitely worth buying!
70688324 : oh yeeH
Noah Johnson OP Iakul : Thanks for correction![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")