2024-06-04 12:38:40 ET
Faraday Future Intelligent Electric (NASDAQ: FFIE) stock price has suffered a deep meltdown in the past three weeks as it plunged by over 86% from its highest point in May. It has crashed to $0.50, bringing its market cap to about $233 million, down from last month’s peak of $789 million.
Huge challenges remain
Faraday Future, the manufacturer of the super expensive electric vehicldes, is in deep trouble as its losses and cash burn accelerates. It is also struggling as the electric vehicle industry gets highly competitive, with hundreds of companies vying for market share.
This view was confirmed by the company’s recent financial results. These numbers revealed that the company’s revenue rose to $784k in 2023. Its net loss jumped to over $431 million in 2023 and $83 million in the fourth quarter.
Most importantly, the company’s balance sheet was a bit thin as it ended the quarter with over $1.8 million in cash , down from $16 million a year earlier. Its inventory build jumped to over $31 million.
These numbers mean that the company will need to raise additional cash in the near term since its cash burn is continuing. We have seen this in companies that have started delivering their electric vehicles.
Rivian, which started delivering its popular trucks a few years ago, lost over $5.4 billion in 2023 after it lost over $6.7 billion a year a year earlier. Similarly, Lucid Motors net loss in 2023 stood at over $2.8 billion, a big increase from the previous year’s $1.3 billion.
Therefore, the implication is that Faraday Future will need to raise additional funds to stay afloat. To do that, the company will either need to use convertible debt or sell more shares. In 2023, the company raised about $100 million in debt.
The company also faces additional challenges. As I wrote recently , it is unclear whether there is enough demand for a $300k luxury electric vehicle. Lucid, which focuses on the luxury market, starts its brands at $69,900, with its most expensive vehicle starting at less than $100k.
Faraday Future stock price analysis
The daily chart shows that the FFIE share price has been in a strong bearish trend in the past few days. It has slumped from last month’s high of about $4 to less than $1 today. It has crashed below the 25-day and 15-day moving averages while the MACD indicator has pointed downwards.
Therefore, the pair will likely continue falling as sellers target the key support at $0.45. However, shorting Faraday is highly-risky since the company is a good candidate for a short squeeze as we saw in May.
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