As the Faraday Future stock price slips, don’t be tempted to buy

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Written on Sep 7, 2023

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Faraday Future share price has plunged by more than 90% this year.
The company is facing numerous challenges as interest rates jump.
The EV industry is facing numerous headwinds.

Faraday Future (NASDAQ: FFIE) stock price continued its freefall on Thursday as concerns about the company’s future remained. The shares plunged by more than 18% on Wednesday and by 6% in the premarket. This means that the shares have plunged by more than 93% this year.

FFIE faces many headwinds

Faraday Future, the controversial EV company has been in trouble this year amid rising concerns about its future. The company and other EV stocks like Mullen Automotive and Canoo face similar challenges.

The biggest challenge is that the Federal Reserve has pushed interest rates to the highest level in over 22 years. And with the US being in a better shape than peers, there is a likelihood that the Fed will deliver another hike this year.

The challenge of high-interest rates is that it makes it highly difficult for these cash-strapped companies to raise cash. In Faraday’s case, the company had over $17.9 million in cash. It also has $173 million in gross committed funds that are not funded yet and an equity line of credit of $350 million.

The reality is that Faraday Future needs more money than this as we have seen with companies like Rivian and Lucid. While these firms started selling their vehicles a while ago, they have been spending and losing billions of dollars.

The second challenge for Faraday Future is demand for EVs. There are signs that many EV companies are not seeing strong demand, forcing them to slashing prices. Tesla has slashed prices of its models drastically. In economics, price cuts can only happen when demand is a bit weak.

I paid roughly 90k for a Model X in the middle of 2022, after waiting 14 months to get it.

Guess selling a used Tesla is not
going to be a thing.

These price cuts are insane. pic.twitter.com/ju0EB6hHny

— The Wolf Of All Streets (@scottmelker) September 3, 2023

Further, EVs have received some negative publicity in the past few weeks. There have been reports of EV cars catching fires after exposure to flood water during the recent hurricane season. Also, many EV buyers are still concerned about range. Therefore, there is a likelihood that Faraday Future will struggle to attract demand.

Faraday Future stock price forecast

Regular readers know that I have been bearish about Faraday Future and Mullen Automotive, as shown here. This view has been accurate as the two stocks have plunged by more than 90% this year.

The daily chart shows that the Faraday Future stock price continued falling and is now trading at the lowest level on record. It has crashed below the key support at $11.57, the lowest level on May 1st.

The shares have dropped below the 50-day and 100-day moving averages. Therefore, I suspect that the sell-off will continue as sellers target the key support at $4.