VinFast stock price analysis: Hard to justify VFS's $14B valuation

VinFast (NASDAQ: VFS) stock price has gone nowhere in the past few months. It was trading at $6.20 on Wednesday, where it has been in the past two months. This price is much lower than its record high of $93.15

VinFast is still a big company with a market cap of over $14 billion. This means that it is a bigger company than Lucid Group, which is valued at over $9.62 billion. It is also slightly smaller than Rivian Automotive, which has a market cap of over $15 billion.

VinFast challenges remain

On paper, VinFast seems like a good company that has room to grow. In October, the Vietnamese company said that it delivered 10,027 vehicles in the third quarter, up from just 153 in the same quarter in 2022. Its e-scooter deliveries rose from 13k to over 28k.

As a result, its total revenue jumped to over $342 million, a 160% YoY increase. Its gross loss increased to $102.4 million while net loss totaled over $622 million. The company ended the quarter with just $131 million in cash.

This thin balance sheet pushed the company to raise capital by selling over 100 million shares. Equity rises lead to a substantial dilution of existing shareholders by increasing the number of outstanding shares.

VinFast needs more money going forward as it seeks to grow its lucrative American business. As such, I believe that the company will need to raise more money in the coming years, which will lead to more dilution.

VinFast also faces other challenges. The mountain in the room is that the EV industry is not growing as fast as it used to. Just this week, Ford abandoned its plan to build a giant battery plant. Other companies like Tesla, Nio, and Lucid Motors have also expressed challenges in the sector.

The other big challenge for VinFast is that its VF8 appears not to be ready yet. For example, the advertised range tends to be inaccurate while its interior design is not up to standard. As a result, its reviews have not been that good, especially when it is compared with its much cheaper rivals like Hyundai IONIQ 5.

Still, not everyone is pessimistic about VinFast. In a recent note, Dan Ives of WedBush said that the stock could double. In their report, the analysts said:

VinFast stock price forecast

VFS chart by TradingView

Turning to the daily chart, we see that the VFS share price has moved horizontally in the past few months. The Average True Range (ATR) has crashed to the lowest level since August this year. A closer look shows that the company’s volumes remains above average, signaling that some accumulation could be happening.

Therefore, the long-term outlook for VinFast is bearish and I suspect it will become a penny stock since it is highly overvalued. In the short term, however, we can’t rule out a situation where the stock rebounds as investors buy the dip.