Is the VinFast Auto Car Wreck a Buying Opportunity?

Key Points

• VinFast is a Vietnamese EV maker with manufacturing facilities in Vietnam and South Carolina already producing and delivering EVs with a tiny $168.6 million market cap.
• The company delivered 10,027 vehicles in Q3 2023, up from 150 vehicles YoY, with full-year 2023 deliveries expected between 40,000 and 50,000.
• Shares collapsed from $93.00 to $7.01, which implies a massive number of bagholders, but the float is still small at only 17.6 million shares, but its founder and chairman own 99% of outstanding shares.

Vietnamese electric vehicle (EV) maker VinFast Auto Ltd. NASDAQ: VFS saw its shares rise from $11.61 to $93 after it went public on August 15, 2023, through a reverse merger via a special purpose acquisition corporation (SPAC). In a move reminiscent of the meme stocks of 2021, in six days, it surged from $11.61 lows to $93.00 highs on August 28, 2023. VinFast manufactures its EVs in Vietnam and North Carolina. It produced its first EV in 2021 and has expanded to four EV models, VF6 through VF9, in addition to producing scooters and buses. The company is already producing EVs and reported deliveries of 10,027 vehicles in Q3 2023, up from 153 in the year-ago period.  

Comparing EV Production and Market Cap with Competitors

The company is showing progress in deliveries despite the crazy stock price action. It is already producing more EVs than Lucid Group Inc. NASDAQ: LCID, expected to produce 10,000 EVs in 2023 and has a market cap of $11.78 billion. It's producing more than Fisker Inc. NYSE: FSR, which expects to make 300 a day in Q4 2023 and has a $2.13 billion market cap. It is behind Rivian Automotive Inc. NASDAQ: RIVN, which produced 16,304 EVs in Q3 2023 with an $18.3 billion market cap. It's no threat to the leader Tesla Inc. NASDAQ: TSLA, with over 435,000 EVs delivered in Q3 2023 with a market cap of $795 billion.

VinES Energy Solutions Stake 

VinFast Auto is a member of the Vingroup ecosystem. VinES conducts research, development and production of high-quality lithium-ion batteries for EVs. VinES has assets of $711 million and net consolidated assets of $183 million. The acquisition helps to secure the supply of batteries and battery cost optimization, resulting in a 5% to 7% savings. Its research and development costs and factor operations will rise in the short term. VinFast is acquiring VinES from its Chairman, Pham Nhat Vuong, at no cost but assumption of the $462 million in outstanding financing for the construction of its manufacturing facilities and support the ramp-up of operations to stabilize.

Solid Growth Momentum 

On October 5, 2023, VinFast released its third-quarter 2023 results. Its revenues were $342.7 million and a profit of 27 cents per share. Gross losses were $102.4 million, with gross margins down 29.9% from -108.2% in the year-ago period. Total deliveries were 10,207 vehicles, up 5.2% sequentially from Q2 2023. E-scooter deliveries were 28,220, up 177.2% sequentially from Q2 2023 and up 113% YoY. VinFast has 126 global showrooms and 247 showrooms and service workshops for e-scooters. The company expects full-year 2023 deliveries between 40,000 to 50,000 vehicles.

Analyst Upgrade

The SPAC advisor and boutique research firm Chardan Research initiated coverage of VinFast with a Buy rating and a price target of $11. Analyst Brian Dobson noted that while irrational forces caused the rollercoaster ride in the shares, it shouldn't detract from the company's meaningful long-term growth. He forecasts annual EV deliveries will surpass 150,000 in 2026 to generate a positive gross margin. He commented, "In our view, VFS has the production capability to capture EV market share. We see the potential for 73% revenue growth through 2026E and a 52% share upside." Notably, nearly 99% of the shares are owned by its chairman and founder, billionaire Pham Nhat Vuong.

VinFast Auto analyst ratings and price targets are at MarketBeat. VinFast peers and competitor stocks can be found with the MarketBeat stock screener.

Daily Bear Flag Stabilization Attempt

The daily candlestick chart on VFS looks like a meme stock parabolic spike, crash and burn. There are no doubt bag holders in this stock left from FOMO buyers on the way up to $93 and dip buyers on the way down to $7.01. The daily chart could pass for a lopsided head and shoulders pattern, with the right shoulder barely mustering a bounce past $18.45 before bear flagging a breakdown to the $7.01 lows. While there may be an enormous selling supply from all the bag holders, it's worth noting that the float is still small at 17.7 million shares. The daily market structure low (MSL) trigger is at $8.23. The daily relative strength index (RSI) stabilizes under the 40-band. Pullback support levels are $7.01, $5.50, $4.50 and $3.40.