FFIE stock: From EV meme craze champion to penny stock again

The global transition to electric vehicles is intensifying, but that doesn’t mean investing in EV stocks is a slam dunk.

Faraday Future Intelligent Electric (FFIE) stock has experienced heavy volatility this year as the California-based EV startup struggles with production delays and a Nasdaq delisting earlier this year.

FFIE stock has declined by roughly 25% over the past month and is down a whopping 94% this year. Despite being a penny stock, FFIE has also experienced extreme volatility to the upside.

In May, FFIE stock surged 4,000% in a week on the back of a retail-driven “meme craze.” The euphoria was aided by the Reddit army, which sought to make FFIE stock the next GameStop.

As of Nov. 25, Reddit’s r/FFIE community had more than 53,000 members.

But even Redditors couldn’t totally ignore FFIE stock’s weak fundamentals. Faraday Future generated a mere $800,000 in revenue in its fiscal 2023, well below analysts’ estimates of $2.59 million. The EV startup reported a net loss of $432 million.

According to the company’s latest financial reports, its current 2024 revenues have improved slightly to $1.07 million.

These figures aren’t totally surprising for a startup operating in a highly capital-intensive industry. In its most recent earnings call, Faraday Future announced that it secured $30 million in fresh financing to shore up its operations.

The company also announced that it regained full Nasdaq compliance, which means FFIE stock has been relisted on the technology-heavy exchange.

Despite these reassurances, FFIE stock isn’t a reliable play for investors seeking exposure to the EV market.

EV market: By the numbers

Global electric vehicle sales have grown rapidly in recent years. According to the International Energy Agency (IEA), nearly one in five cars sold in 2023 was electric. In volume terms, nearly 14 million electric vehicles were sold that year.

By the first quarter of 2024, EV sales had grown by 25% on a year-over-year basis, according to the IEA. IEA projections show EV sales could reach 17 million in 2024.

The problem is that EV manufacturers have struggled to turn this demand into a viable business model. As InvestorsObserver reported, even EV juggernauts like Tesla and BYD rely heavily on government subsidies to make ends meet.

One of the biggest issues EV makers face is they severely underestimate their capital needs, often to the tune of billions of dollars. According to AutoForecast Solutions, at least 30 EV companies have either shuttered their doors or suspended operations in the last decade.

If recent history is any indication, EV makers wishing to make it in this market should be prepared to “eviscerate” billions of dollars, said Mark Wakefield, a managing director at AlixPartners.

“[I]t’s interesting to see these other small startups who raise $1 billion or $2 billion and they think that’s enough. It’s not even close,” Wakefield said.

While starting a car company is more attractive now than it was ten years ago, entrepreneurs are likely to find better opportunities in social media, consumer services, or something else, Wakefield said.

“Just look at the capital returns—not the stock prices, the actual returns on capital,” Wakefield said, referring to the EV business. “They’re not very attractive. This is a highly capital-intensive, competitive industry.”