Over the years, I try to steer clear of overly direct assessments of publicly traded enterprises, especially if my opinion is negative. However, with premium electric vehicle manufacturer Faraday Future (NASDAQ:FFIE), I’m afraid I’m going to have to be blunt. Unless you’re a day trader speculating on near-term blips, you want to stay far away from FFIE. It would not surprise me in the least to see Faraday Future stock stumble to $0.
While that sounds excessively harsh, recent automotive history is replete with examples of why FFIE is likely doomed for the junkyard. Outside of sector king Tesla (NASDAQ:TSLA), I don’t think there’s one single EV enterprise that would be considered a success. By success, I’m not defining that in terms of getting a vehicle out to production. Rather, I’m looking at a combination of financial viability and shareholder returns.
What makes Faraday Future stock a special case — especially bad — is that it completely lacks the fundamentals of a true automotive enterprise. Basically, in order to convince people to give up a large sum of money, automakers must deliver excitement. Faraday is delivering boredom, if not cries for help. Therefore, I really have no choice but to be bearish on FFIE.
Faraday Future Stock is Unlikely to Succeed Where Others Have Failed
As I stated earlier, I can’t think of a non-Tesla company that has genuinely succeeded in the electrification space. Sure, legacy automakers have begun transitioning to EVs but it’s clear that the bread and butter of these organizations remain the internal combustion engine. With so many competitors having struggled, and struggled badly, it’s probably the game, not the brand.
There’s an adage that states that the classic definition of insanity is doing the same thing over and over again and expecting a different result. To be sure, if you failed a bunch of times, it’s time for a change.
Here’s what I’m getting at. Not too long ago, business media outlets were fixated on Mullen Automotive (NASDAQ:MULN). MULN stock is down more than 93% on a year-to-date basis. In the past 52 weeks, it hemorrhaged over 99%.
What about Canoo (NASDAQ:GOEV)? Back when the company launched its lifestyle vehicle with a skateboard platform (which enables the manufacturer to pump out different chassis types), many early investors thought that it had potential to appeal to younger drivers. GOEV stock is down 86% in the past year.
Remember ElectraMeccanica? This company built a three-wheeled EV (or trike) that seated only the driver. The idea was that because people commute to work alone in their vehicles, the inclusion of multiple seats was unnecessary.
ElectraMeccanica doesn’t even trade anymore, having been acquired by Xos (NASDAQ:XOS). Perhaps not coincidentally, XOS stock dropped over 98% since its public market debut.
Terrible Fundamentals Present Massive Risks
For ElectraMeccanica, it was a bad idea at a relatively low price. That couldn’t save the trike, appropriately called Solo, from eventually piling up in junkyards. With Faraday’s premium EV, it’s a bad idea at an astronomically ridiculous price. Therefore, I have almost zero confidence in Faraday Future stock.
The main problem, to emphasize, is the price. At over $300,000, the vehicles will only be accessible to a select few. It wouldn’t be so outrageous if the company launched a halo car: a sexy exotic that got people walking onto showroom floors. Instead, the company went with an unimpressive SUV/crossover that looks like any other car.
Granted, the acceleration is phenomenal but how many people are in the market for a family vehicle that can do 60 miles per hour from a standstill in 2.3 seconds? My guess is not many. And judging by the poor sales, I’m answering my own question.
If you think about it, the whole business is a mess. First, Faraday is a terrible name for a car company. You want to sell prestige and sex appeal, not science books. Second, while SUVs and crossovers are popular, the company needed to consult with European designers to craft a memorable aesthetic. The automaker’s FF 91 is utterly forgettable.
It’s possible that Faraday Future stock might see the occasional pop higher. However, with such poor fundamentals, the EV maker risks being nothing more than a tax deduction (following hefty losses).
The Takeaway: FFIE Stock Lacks Cohesion
Ultimately, if I had to sum up my concerns about Faraday Future stock, it would be that the underlying enterprise lacks cohesion. If it wanted to run a $300,000 price tag, it could do so but with the right car. However, what the company has come up with looks pedestrian and is unbefitting such a lofty entry point. Further, nothing about the company screams prestige. With so many other failures in the EV ecosystem, investors should steer clear of FFIE.
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
