Faraday Future’s (FFIE), stock soared parabolically on Thursday, in a highly-active market. It is now one of Wall Street’s best performers. Yahoo Finance reports that it jumped over 125% and its market capital reached over $100,000,000.
Stocks of FFIE have soared
Faraday Future’s shares reached a record high of $8.10 – its highest price in more than three weeks. The rebound occurred as the total volume of Faraday Future shares jumped from 3.1 to 123 millions, a higher number than average. This also occurred on the day when Tesla’s shares fell by more than 4%. In many cases, EV firms tend to follow Tesla’s progress.
It was notable that the rebound occurred on a day in which there were no company news. The company’s latest news was revealed on Monday, when it announced an event that will take place on 19 September.
The company is launching the China-US Automotive bridge strategy at this event. Its goal is to sell its Artificial Intelligence technologies to OEMs and parts suppliers. The company will target companies that build vehicles priced between $20,000 to $80,000.
Faraday Future hopes that it can make money two different ways. It will sell its cars and provide its technology to Chinese firms. These vehicles are expected to have the same technologies as Faraday Future’s $300,000.
Recent Faraday Future Earnings
Stocks of Faraday Future soared in the weeks following publication of its financial quarterly results. The company’s revenues were only $293,000, as it has not sold any vehicles yet.
The quarter ended in June 2023, the company had a loss of $124,000,000. This is a significant improvement over the $124,000,000 it lost in that same period in 2023. It had a loss in the first half of the year of $156 millions, which is also less than 2023’s $269 million.
Despite the fact that it has cut its losses in half, there are still several factors which put its business at risk. Faraday Future has run out of money and is in a tight spot.
It ended last quarter with $793,000 cash, and $584,000 restricted cash. The company also holds customer deposits of $27,000,000 and has over $28,7,000,000 in inventory. It has over $70 in assets and $77 in liabilities. This gives it a negative working capital of $7 million.
The company must therefore raise capital either through debt or equity. The company reported that in its recent financial report, it had increased the number common shares from 12.3 millions to 4.2 million. This is a significant amount, as the current outstanding stock of the company exceeds 4.2 billion.
Faraday is going to take some time before it becomes profitable. Recent years, companies such as Lucid and Rivian have continued to make substantial losses many years after delivering their cars.
The luxury car segment is a source of anxiety
Faraday Future faces other dangers. The company’s flagship model has 1,050 horses and an estimated range 381 miles. This is lower than Tesla Model S Long Range which boasts a 405-mile range.
Lucid Air is one of the best-selling electric sedans. It has a range estimated at 516 miles. A car costing $300,000 has a 381 mile range that is insufficient. A traveler traveling from Los Angeles (385 miles) to San Francisco will have to recharge. The infrastructure for fast charging has increased, but it could take you over 30 minutes to charge your vehicle.
There is no way to know if there will be enough demand for a high-end luxury EV. Spending the same amount on an EV such as Faraday could be used to purchase Mercedes-AMG GT R or Bentley Continental. Or even Aston Martin DB11.
Faraday’s California factory has the ability to build over 10,000 cars a year. This is more than Lucid made and sold in 2023, which was 8,428 vehicles.
Depreciation is a major concern for EV owners. Depreciation is a major issue for luxury EVs such as the Porsche Taycan and Lucid.
Faraday Future Stock Price Analysis
You can find my warnings about Faraday Future here and here.
In those same reports, I also cautioned against shorting Faraday because it behaves as a meme stock. In May it was parabolic, while other companies such as AMC and GameStop were soaring. The stock then dropped to zero and was split.
The current FFIE stock recovery will not last long. I believe that the FFIE stock will fall below $5 within the next couple of weeks, and move below $2 at the end the year.
As updates are made, this post Faraday Future surged: a crash could be on the way may be changed.
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