VinFast (NASDAQ:VFS) – which specializes in the manufacturing of electric vehicles, e-scooters and e-buses – is not a company I am confident in for the long term. While EVs may represent the future of mobility, the industry is struggling against a host of economic challenges. Still, for near-term speculation, VFS stock could offer a tempting wager.
The issue with VinFast and any pure-play EV company is the industry. The automotive sector is capital intensive. Every year that goes by, the company’s cash burn worsens.
Plus, the price point of EVs has long been a challenge to wider adoption. In April of this year, the average transaction price for electric cars stood at $55,242. However, for combustion-powered vehicles, the price tag came in much lower at $44,989.
To be fair, VinFast offers a range of vehicles, with its premium model VF9 starting at $69,800. However, its VF8 can be leased for only $299 per month (given certain criteria). Further, the upcoming VF6 – a compact crossover – could help enhance accessibility for prospective EV buyers. That’s a potential positive for VFS stock.
VinFast Is About Winning a Game, Not a Championship
Prospective market participants should recognize the pros and cons of VFS stock so that they arrive at the main takeaway: VFS stock is a trade (and a highly speculative one at that), not an investment. Shares are down nearly 83% in the past 52 weeks. VinFast needs to show you something before it’s worthy of your “commitment” dollars.
Still, if you have some “speculation” dollars lying around, VFS stock may be worth keeping on your radar. In part, that’s because of the possible short squeeze at hand.
Right now, the company’s short interest stands at 14.76% of its float. Notably, Fintel’s proprietary Short Squeeze Score rates VFS as an 85.12 out of 100. Higher scores indicate a higher risk of a short squeeze materializing.
Another factor that could bolster VFS stock comes down to the technical profile. Recently, VinFast shares blew past the resistance line near $5. On Monday, VFS closed at $6.32. Therefore, the immediate sentiment is clearly bullish. Not only that, the next major resistance level is $8.
I identified this level because VFS stock attempted to break above this level in October 2023 following a major implosion, only to fail. Subsequently, VFS attempted to break above $8 again in late 2023, but only with temporary success.
Probabilities dictate that VFS stock will again attempt to break above $8.
Trade of the Day: Buy VFS Stock Call Options
To be honest, I don’t want any of that noise at the $8 level. It’s possible that VFS stock could fail yet again. However, it’s likely that the bulls will at least carry VinFast to this zero line. This projection sets up today’s trade of the day: buying VFS stock call options.
Specifically, I’m looking at the 20 Sep 2024 $7 call. On Monday’s close, the premium for this derivative was 80 cents (or $80 to control 100 shares). In simple terms, that means that if we were trading this call based purely on intrinsic value, VFS stock would need to surpass $7.80 to be profitable. That’s the simplest math.
However, it’s possible for the $7 call to be profitable based on a combination of intrinsic and remaining time value. In that case, a steady journey toward $7.80 could yield significant rewards for the forward-thinking speculator.
Enticingly, analysts rate VFS stock a unanimous strong buy. And with a consensus price target of $8.33, this is a high-risk wager you’ll want to keep close tabs on.
On the date of publication, Josh Enomoto 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.
