Faraday Future stock price: Lessons from Rivian, Lucid
- Faraday Future will start delivering its first vehicles in April.
- The company’s balance sheet is strained, raising bankruptcy risks.
- Rivian and Lucid Motors have boosted their cash burn.
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Faraday Future (NASDAQ: FFIE) stock price retreated this week even as the company made a major announcement on Wednesday. The shares dropped to a low of $0.3544, the lowest level since January 10 of this year. It has plunged by almost 100% from its highest point on record.
Uncertain future ahead
Faraday Future, an electric vehicle startup that has burnt over $3 billion, has announced plans to start manufacturing its vehicles. In an event, the company said that it will start delivering its FF 91 EV in April, which is an important milestone. The first car will be delivered to the company’s founder, Jia Yueting.
However, like other EV companies, Faraday Future has an uncertain future ahead. For one, the company’s cash burn is set to increase in the coming months as it attempts to ramp up production. We have seen this with EV companies that have moved to production like Rivian and Lucid.
Rivian burnt over $6 billion in 2022 while Lucid incinerated over $2 billion. A key technology news this week was that Lucid will lay off over 1,000 employees. Most importantly, as we wrote here, Ford’s EV business lost $3 billion in 2022.
The challenge for Faraday Future is that it has thin liquidity. The most recent report showed that it has $17 million in cash and short-term investments. Its account payable was $87 million while accrued expenses jumped to $22.4 million while long-term debt rose to $26 million.
Therefore, Faraday will likely need to raise capital to fund its production process. And with the stock trading at a record low, that could be a tough call.
Faraday Future faces other challenges as well. For example, competition in the EV industry is rising, with companies like Rivian and Ford battling for market share. Further, it does not have a vast charging infrastructure like its peers.
Most importantly, like other car companies, Faraday Future’s cars will likely have recalls, which can be costly. Rivian spent millions of dollars when it recalled its trucks last year.
Faraday Future stock price forecast
The daily chart shows that the Faraday Future share price has been in a strong bearish trend in the past few weeks. It has dropped below all moving averages while the MACD has moved below the neutral point. Faraday’s volume has remained at an elevated level.
Therefore, despite the new production stage, the stock will likely continue falling as sellers target the next key support level at $0.2347. In the long term, I can’t rule out a situation where the stock continues falling to zero.
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