Faraday Future (NASDAQ:FFIE) reminds me of four other, largely unsuccessful electric-vehicle makers: Workhorse (NASDAQ:WKHS), Mullen (NASDAQ:MULN), Canoo (NASDAQ:GOEV), and Nu Ride (OTCMKTS:NRDE), formerly known as Lordstown Motors.
Like those other firms, Faraday talks a great deal about unimpressive future plans and partnerships that are either unremarkable or unspecific or both. And similar to its troubled peers, Faraday has never generated much revenue. Workhorse had only $13 million in revenue last year despite being founded in 2007. Mullen and Canoo did even worse, having less than $1 million in sales in 2023 despite being launched several years ago. Lordstown went bankrupt in June 2023.
Faraday perpetually does not seem to have enough cash to get its EV business off the ground and is weighed down by large amounts of debt. Given these points, I expect the EV maker to continue struggling like those other EV stocks. I strongly recommend investors sell Faraday Future stock.
Faraday’s Milestones
During Faraday’s last earnings call in May, the automaker disclosed several unimpressive “milestones.” For example, CEO Matthias Aydt noted the firm had begun production of its FF 91 2.0 EV, and the vehicle had “passed U.S. Federal Motor Vehicle Safety Standards crash test requirements.”
Moreover, Aydt disclosed the company, in its entire history, had delivered only 11 EVs. Although each of its EVs costs a huge $309,000, the firm’s delivery total is obviously still very low. That’s especially true because the automaker was founded a decade ago. Consider, for example, that 326 units of Rolls-Royce’s Spectre EV, which became available in the last quarter of 2023, were sold just in the latter three-month period. The Spectre’s base price is $420,000.
Aydt also noted that Faraday had started a leasing program, “obtained a Bureau of Automotive Repair license,” rolled out a public charging program” and established a “sales entity in Dubai.” None of these initiatives is likely to move the needle for Faraday or FFIE stock. That is because they are unlikely to cause the company’s very low delivery pace to accelerate.
Faraday’s Future Plans
The automaker, which was founded by Chinese entrepreneur Jia Yueting, is looking to launch a “U.S.-China automotive industry bridge.” Reading between the lines, this refers to efforts by Faraday to partner with both U.S. and Chinese automakers. Through such partnerships, the company hopes to provide automakers with access to its “major technology systems” and “major technology platforms.”
For Faraday and the owners of Faraday Future stock, however, the problem is that multiple, struggling EV makers have also tried and failed to launch similar alliances. For example, Lordstown and Taiwan-based manufacturing giant Foxconn (OTCMKTS:FXCOF) intended to launch a partnership but it fell through. It forced Lordstown to declare bankruptcy. Similarly, Fisker (OTCMKTS: FSRNQ) also tried to reach a deal with Nissan (OTCMKTS:NSANY) before declaring bankruptcy.
A Troubled Balance Sheet
As of the end of last year, Faraday had only $1.9 million of cash, according to Yahoo Finance. That’s, of course, a tiny amount given the huge amounts of money required to manufacture automobiles. What’s more, the company owed nearly $119 million. Given the firm’s low cash, high debt and anemic revenue generation, I believe the EV maker is at very high risk of going bankrupt in the not-too-distant future.
The Bottom Line on Faraday Future Stock
Faraday has generated very little revenue in its history and none of the automaker’s initiatives looks poised to change that in the foreseeable future. Moreover, the company appears to lack the necessary cash to manufacture EVs effectively. Its high debt levels could easily push it into bankruptcy relatively soon.
In light of all of these points, Faraday Future stock is a clear sell.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
