VinFast stock has stalled: brace for volatility ahead of earnings

VinFast (VFS) stock price has remained in a tight range since October last year as concerns about the Vietnamese company continued. In this period, the stock has remained between the key support at $2.10 and the resistance point at $9. It is down by over 90% from its all-time high, giving it a market cap of over $9 billion.

Risky EV bet

On Tuesday, we wrote about Mullen Automotive, an American electric vehicle company that seems to be destined to run out of money and file for bankruptcy soon. 

Mullen joins other companies like Lordstown Motors and Fisker that have run out of money. Others like Canoo, Faraday Future, and Workhorse Group are hanging in there and are at an elevated risk of filing for bankruptcy

Then there is VinFast, a Vietnamese company that is seeking to challenge American EV companies like Tesla, Lucid, and Rivian. It also aims to become a major competitor to Chinese EV brands like Nio and BYD. 

The challenge is that the company faces substantial risks. Broadly, competition in the EV industry is rising as more customers prefer hybrid vehicles. While EV demand is rising, it is not doing so as it did in the past. 

A good example of this is Tesla, a company that has mastered the art and science of manufacturing. Its stock has plunged by over 23% from its highest point this year, meaning that it is in a deep bear market. 

This decline happened after the company published weak financial results in July and postponed its robotaxi business. If Tesla is going through challenges, then smaller rivals like VinFast are doing worse. In July, VinFast downgraded its vehicle delivery forecasts and decided to delay its North Carolina plant.

Delaying the plant is an important thing for VinFast, which aims to challenge Tesla in its home market. By not having an American plant, it means that the company’s vehicles will not be eligible to receive incentives from the government. 

On the positive side, the company has announced several measures to expand in other countries. It recently expanded in Indonesia by launching 15 dealer stores in the country. It also signed an agreement with a Qatari dealer that will start selling its vehicles. 

VinFast Q1 results

The most recent results showed that VinFast delivered 9,689 vehicles in the first quarter, a big increase from the 1,780 it sold in Q1’23. These deliveries were lower than the 13,513 that it delivered in the fourth quarter of last year. 

Additionally, the company’s results showed that its e-scooter deliveries stood at 6,632 in Q1, down from the 9,757 and 24,309 that it delivered in Q1’23 and Q4’23, respectively. These numbers meant that the scooter business was not doing well.

VinFast’s revenue came in at about $302 million in the first quarter, a big increase from what it made a year earlier. However, the company also made a net loss of over $618 million and the loss-making trend could continue.

Historically, it takes EV companies a few years to turn a profit as we have seen with the likes of Rivian and Lucid. Rivian’s total net loss in the past five years stood at over $17 billion even as the company started delivering its vehicles.

At the time, VinFast’s goal was to deliver 100,000 this year, a number that it reduced in July as business conditions worsened. It believes that it will deliver 80,000 this year.

VinFast second-quarter estimates

The next important catalyst for the VinFast share price will be its earnings scheduled for Thursday this week.

In a recent statement, VinFast noted that it had delivered 12,058 vehicles in the second quarter, a 24% increase from Q1 and 26% YoY. It delivered 21,747 vehicles in the first half of the year. 

Based on these numbers, analysts expect the upcoming results to show that the company’s revenues came in at $440 million in Q2. They also expect that its annual revenue will be $2.49 billion followed by $4.83 billion in 2025. These estimates are from just four estimates. 

I believe that VinFast faces a major challenges ahead. Like other EV companies, its primary issue is that its balance sheet is a bit stretched. It is losing hundreds of millions of dollars while it ended the last quarter with $124 million in cash.

VinFast stock price analysis

Turning to the daily chart, we see that the VFS share price has been in a tight range in the past few months. It has remained below the descending trendline that connects the highest points since December last year. 

The stock is consolidating at the 50-day moving average while the accumulation/distribution indicator has moved sideways. 

Therefore, the VinFast stock price will likely have a strong bearish breakout after it publishes its results on Thursday. If this happens, the next point to watch will be at $3. The caveat is that the stock could have significant volatility after earnings.