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After an 85% Rally, Is It Too Late to Buy VinFast Stock? (NASDAQ:VFS)

2 years 4 months ago

VinFast ( NASDAQ:VFS ) stock is currently trading way below its $22 a share IPO on August 15, 2023. It’s been an inauspicious first few quarters from Vietnam’s answer to Tesla ( NASDAQ:TSLA ) and its Chinese peers. However, with the stock up 85% over the past month, have those on the sidelines missed the chance to buy the new pretender to the EV throne? Personally, I don’t think there’s an opportunity here. With a debt-heavy position, a lack of momentum in EV sales, and a price-to-sales ratio in line with Tesla, I’m bearish on VFS stock. VFS has gained 85% in the past month but is still down 42% year-to-date. VinFast’s IPO Disaster VinFast was listed on the Nasdaq ( NASDAQ:NDAQ ) on August 15 with the stock initially receiving plenty of investor interest. In fact, the stock surged, with the pre-profit Vietnamese EV company reaching a market cap of $191 billion in late August. This made VinFast the third most valuable carmaker globally, behind Tesla and Toyota ( NYSE:TM ). VinFast’s market cap matched the level Tesla achieved in June 2020. At that time, Tesla had delivered 367,656 vehicles in the previous year. Toyota had delivered over 10 million vehicles in 2019. By comparison, VinFast had sold just 24,000 in the previous year. It also only had one model on sale in the U.S. at the time. However, the good times didn’t last long, and the stock slumped. The stock has fallen from highs around $93 per share to just $5 at the time of writing. It was trading around $2.50 in April. It’s a highly volatile stock that appears to have landed on the radar of traders in recent weeks due to its high levels of short interest. VinFast Isn’t Growing Fast VinFast stock made gains after its Q1 earnings despite a challenging first quarter. The company delivered just 9,689 units in Q1, with the 28% sequential decline attributed to the low season and Lunar New Year in Vietnam. VinFast reported revenue of $302.6 million for the quarter and a net loss of $618.3 million. This was a revenue miss of $119.77 million and a $0.02 earnings per share miss. However, it’s important to note that EV deliveries were up 444% over 12 months. Still, CFO Nguyen Thi Lan Anh highlighted that Q1 was also an outlier in 2023, representing just 6.8% of full-year revenue and only 5% of total deliveries. The stock pushed upwards on the company’s sales guidance. VinFast said it expects to deliver 100,000 vehicles in 2024. Improving sales will driven by the opening of more showrooms and the release of new models to target new customers in new markets, the company said. The U.S. market is likely core to these plans. VinFast also acknowledged that the majority of its sales had been domestic, with just a smattering in the U.S. The company said deliveries in the U.S. had been helped by a special leasing offer on the VF8 —$249 per month. That appears competitive and, as far as I can tell, is cheaper than the bottom-of-the-range Tesla Model Y. Is There Value in VinFast Stock? Comparisons with Tesla are necessary as one of the sector’s dominant figures. VinFast operates in an increasingly competitive market, one in which Tesla is putting increasing pressure on its peers through price cuts. Despite all the supposed cost advantages of being based in Vietnam, VinFast’s VF8 is currently sold in the U.S. at a premium to the supposedly superior Tesla Model Y. Moreover, concerns about the quality of its vehicles have been raised. I appreciate that this could change as VinFast moves to produce in the U.S. These vehicles wouldn’t be subject to tariffs and would benefit from a new $7,500 U.S. tax credit for EVs that are assembled within the country. It’s also worth highlighting that VinFast is currently trading in line with Tesla. Tesla is expensive for an EV company and is valued like a tech firm, given its ancillary operations and plans to build out revenues from other streams. So it’s a little concerning to see VinFast trading at 5.3x forward sales. Tesla is trading at 5.6x forward sales — but at least it’s profit-making. Moreover, VinFast is heavily indebted, with current liabilities exceeding $6.6 billion. The company owner — he owns around 98.5% of shares — and Vietnam’s richest man, Pham Nhat Vuong, believes the carmaker will break even or have positive gross profit in 2025. At this moment in time, and given the company’s performance in Q1, that sounds like a tall order. However, I’d be happily proven wrong. Is VinFast Stock a Buy, According to Analysts? On TipRanks, VFS comes in as a Moderate Buy based on two Buys, zero Holds, and zero Sell ratings assigned by analysts in the past three months. The average VinFast stock price target is $6.50, implying 34% upside potential. The Bottom Line on VinFast Stock While I’d like to see VinFast succeed, I remain a little dubious at the moment. However, I’d like to see the company change my mind. Currently, I find it hard to get behind a stock that trades with similar multiples to Tesla having delivered fewer than 10,000 vehicles in the first quarter. To date, it’s also been largely reliant on domestic sales, and as such, it’s somewhat unproven in the more lucrative U.S. market. Disclosure

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