VinFast Auto(NASDAQ: VFS) took investors on a wild ride after it went public by merging with a special purpose acquisition company (SPAC) last August. The Vietnamese automaker's stock opened at $22 on the first day of trading and soared to a record high of $82.35 less than two weeks later, but now trades at about $5.
VinFast initially impressed investors with its ambitious delivery targets and electric vehicle (EV) plans, but its stock crashed when it missed those estimates. High interest rates also compressed its valuations and cast a harsh light on its steep losses.
Image source: VinFast.
It's easy to see why the bulls abandoned VinFast, but could it still generate millionaire-making gains for patient investors who tune out the near-term noise? Let's review VinFast's business model, its growth rates, and its valuations to decide.
What does VinFast do?
Vingroup, one of Vietnam's largest private conglomerates, founded VinFast Auto in 2017. It initially signed a licensing and distribution deal with General Motors' Chverolet in 2018, and it launched its first batch of vehicles (the Lux A2.0 sedan, Lux S2.0 SUV, and the Fadil crossover) in 2019. It expanded that lineup with e-scooters and Vietnam's first electric bus in 2021.
VinFast sold 7,400 vehicles, all for the Vietnamese market, in 2022. But at the end of the year it stopped producing its gas-powered vehicles and focused entirely on producing its VF-series EVs and electric scooters. It also took its first major step overseas by shipping its first batch of 999 EVs to the U.S. market in late 2022. It's also in the process of building its first U.S. plant in North Carolina.
VinFast's two EVs for the U.S., the VF 8 mid-size crossover and VF9 crossover SUV, start at about $50,000 and $70,000, respectively. They're cheaper than Tesla's Model X, but they're still pricier than comparable EVs from Nissan and Hyundai. Its EVs in Vietnam cost about $20,000.
How did VinFast disappoint its investors?
Prior to going public, VinFast claimed it could sell 50,000 EVs in 2023. However, it only delivered 34,855 EVs and 72,468 electric scooters for the full year.
Its revenue rose 91% to $1.2 billion, but its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss widened from $1.5 billion to $1.6 billion. Its net loss widened from $2.1 billion to $2.4 billion, while its annual free cash flow (FCF) declined from negative $2.2 billion to $3.3 billion. That's not a promising situation for a company that ended the year with just $168 million in cash and $5.8 billion in current liabilities.
VinFast already disappointed its investors by missing its original forecast, and a fatal crash involving a VF 8 in California this April recently triggered a National Highway Traffic Safety Administration (NHTSA) investigation. All of those issues, along with high interest rates and the broader slowdown of the EV market, weighed down its stock.
But don't ignore the green shoots
On the bright side, VinFast's gross margin rose from negative 82% in 2022 to negative 46% in 2023 as its deliveries accelerated. It delivered 9,689 EVs in the first quarter of 2024, and it plans to deliver over 100,000 EVs for the full year.
Based on that ambitious target, analysts expect its revenue to surge 138% in 2024, and grow 75% in 2025 and 36% in 2026. Those are incredible growth rates for a stock that trades at just four times this year's sales. Tesla, which is growing at a slower rate, trades at six times this year's sales.
Could VinFast generate millionaire-making gains?
If you invest $10,000 in VinFast today at $5, its stock price would need to rise 100-fold to $500 to grow your investment into $1,000,000. At that price, VinFast would be worth $1.15 trillion -- making it worth twice as much as Tesla today.
Assuming its price-to-sales ratio holds steady, it would need to grow its top line at a compound annual growth rate (CAGR) of 20% over the next 25 years to hit that target. That's certainly not impossible, but it's far too early to tell if VinFast can overcome its growing pains, scale up its business, and stand out in the crowded EV market. So for now, VinFast might be a promising speculative play at these prices. But I won't get ahead of myself and call this a millionaire-maker EV stock yet.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
