By VinFast Auto Ltd (NASDAQ: VFS) is in focus today following a report that it has signed an agreement with a group of Emirati investors led by Emirates Driving Co.
The news is significant for shares of the electric vehicles company as the deal entails it receiving a whopping $1.0 billion in funding from that consortium.
Emirates Driving has also committed to helping VFS with driver training, road safety, and setting up an EV ecosystem, as per people that talked to Bloomberg on condition of anonymity on Wednesday.
VinFast stock is now up more than 60% versus its year-to-date low in late April.
VinFast stock remains a risky investment
VinFast is celebrating the sizable funding it reportedly secured on Wednesday – but there’s reason to remain cautious in investing in this EV company.
To begin with, it has rallied rather sharply over the past six months.
So, much of the good news may already be priced into VFS. But a bigger concern is: can we expect good news from VinFast in the first place?
VinFast stock was a big disappointment when it reported its financial results for the second quarter in September – and while its outlook for full-year deliveries was upbeat, I’m not fully convinced that it will be able to meet much less beat it in 2024.
The Vietnamese firm expects to deliver a total of 80,000 vehicles this year.
But its deliveries were capped at 22,000 only in the first half, which means VinFast has to deliver 58,000 vehicles in the back half to meet its guidance.
And yes, VFS has been seeing rapid growth, but hitting that number in H2 would still be challenging, to say the least.
VFS may fail to meet its deliveries guidance
It may be wise to remain cautious on VinFast stock also because it’s losing money.
In fact, the Nasdaq-listed firm lost 33 cents a share in its fiscal Q2 – up from 24 cents a year ago and 21 cents that experts had forecast.
Shares of this automaker are somewhat unattractive because its management continues to talk about the ability to successfully expand into Europe and the United States but is yet to meaningfully deliver on that commitment yet.
Our market analyst Crispus Nyaga also recommends avoiding VFS stock that doesn’t pay a dividend at writing.
Still, Wall Street currently has a consensus “buy” rating on VinFast shares. Analysts see upside in them to $8.0 on average that signals potential for a 100% gain from here.
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