The ride may be over for Faraday Future Intelligent Electric (NASDAQ:FFIE). After FFIE stock surged to unexpected heights earlier this month on short squeeze momentum, the micro-cap electric vehicle (EV) producer is back below the $1 mark today.
After the close of markets yesterday, the company reported worse-than-expected earnings for the fourth quarter of 2023. It certainly doesn’t look good that Faraday Future missed Wall Street estimates on revenue, reporting only $800,000, opposite the already-low forecast of $2.59 million. But likely even more concerning is the fact that the automaker has withdrawn its production outlook for the year, sending FFIE stock down.
Some may see this as a poor reflection of the EV market. But the production outlook announcement is a company-specific catalyst and it says more about Faraday Future than about the sector as a whole. Specifically, it says that FFIE stock is in trouble and will likely continue falling in the coming weeks.
What’s Happening With FFIE Stock
Since markets opened today, FFIE stock has been on a downward trajectory. As of this writing, it is down more than 42% and isn’t showing signs of a rebound. With shares trading at 67 cents after closing out yesterday at more than $1.10, the company’s future looks highly questionable. The meme stock frenzy is over, and short squeeze speculation seems to have died down, leaving FFIE stock with the same bleak prospects it had before the rally began.
Why has Faraday Future withdrawn its production outlook? The company claims it is due to volatile market conditions and current funding problems. But the latter is likely much more of a problem than the former. Even in a strong market, the EV producer would still be facing company-specific problems. As The Wall Street Journal reports:
“Faraday Future Intelligent Electric’s news come about six months after announcing it aimed to reach phase 3 EV delivery to the general market by the end of the first quarter, and three months after it said it was “prioritizing cash flow breakeven over volume to avoid scaling production too quickly.”
It’s true that Faraday isn’t the only small-cap automaker to scale back its production outlook. Almost two months ago, fellow struggling EV producer Fisker (OTCMKTS:FSRN) did the same, a decision that accelerated its race to the bottom. Experts have suggested that Faraday is likely to follow Fisker’s path, which will likely lead directly off a clip. The company’s recent production news further supports this argument.
The Gloomy Road Ahead
When FFIE stock surged earlier this month, investors wondered if it could actually turn around. While Faraday remained the undisputed winner of the meme stock rally, today’s news should serve as a key reminder to investors.
At its core, FFIE is nothing more than a meme stock and not even a strong one. The most likely scenario is that the troubled company will continue on its path to becoming the next Fisker. That’s not a title that anyone should want.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
