By most measures, Vietnam-based EV manufacturer VinFast (NASDAQ:VFS) represents a risky ride. In particular, shares have fallen by 35% YTD. However, five-star-rated Wedbush analyst Daniel Ives endorsed a contrarian take, giving the stock a Buy rating with a $12 price target (implying 81% upside potential). Given Ives’ reputation and direct hands-on analysis, speculators may at least want to consider his argument before deciding. I am short-term bullish on VFS stock due to the underlying credibility boost.
An Extraordinary Call Warrants a Closer Look at VFS Stock
Admittedly, if any other analyst – especially someone lacking name recognition – labeled VinFast as an upside opportunity, I probably wouldn’t even bother. Fundamentally, all investors must understand the stiff challenges that VFS stock and its ilk face. With a sector-wide price war causing tangible damage to individual players, no one should enter the EV space without conducting due diligence.
At the same time, Dan Ives represents one of the most respected experts on Wall Street. Per TipRanks, he’s a five-star analyst, currently rated 151 out of 8,725 professional analysts. With a success rate of 59% and an average return per rating of nearly 15%, Ives probably isn’t the type to risk tarnishing his hard-earned reputation on a wild goose chase.
Specifically, the analyst believes that VinFast is on the right path toward achieving its core goals. These involve creating a robust product portfolio for global electric transportation while also developing a strong ecosystem to generate long-term profitable growth. “We have seen the impressive VinFast operations in Vietnam firsthand and came away extremely impressed with its EV footprint,” stated Ives in a research note.
In addition, TipRanks reporter Marty Shtrubel mentioned that VinFast plans to build another facility in the Asia-Pacific region. The company will also target 50 new markets by the end of 2024. While intensely ambitious, the directive enjoys support from an anticipated $1.25 billion cash infusion directly from VinGroup Founder and Chairman Pham Nhat Vuong.
VinFast’s Pricing Could be the Make-or-Break Deal
To be sure, Ives isn’t blind to the challenges that upstart EVs encounter. However, he also stressed, “Vinfast EV vehicles are the result of years of R&D, massive engineering resources, complex supply chain relationships, and are now set for primetime.” That’s a bold statement, and the reality of the bullish forecast for VFS stock could come down to pricing.
According to VinFast’s website, the company’s lowest-price EV – the VF8 Eco – comes in at $46,000. Fundamentally, the drawback here is that Tesla (NASDAQ:TSLA) offers a rear-wheel drive Model Y that tips the scale at merely $32,890. In fairness, VinFast offers a better bumper-to-bumper warranty — 10 years or 125,000 miles (whichever comes first) versus four years or 50,000 miles.
Nevertheless, consumers might jump aboard Tesla, given its social cachet and extensive public charging network. On the surface, that’s not a great setup for VFS stock. However, VinFast is also releasing a more economical model, the VF6. Further, Car and Driver reports that the VF6 might start at about $30,000. Combine that with the aforementioned bumper-to-bumper warranty, and consumers might consider making the switch.
Undeniably, VFS stock represents a wildly risky idea. Indeed, options flow data – which screens exclusively for big block trades – shows that major entities have written (sold) call options at various strike prices and across multiple expiration dates. Effectively, they’re placing bets that VFS won’t rise to certain defined levels and are collecting premiums on these wagers.
Still, if VinFast starts hitting milestones, the volatile VFS stock could potentially spark a short-covering rally.
Financials Point to a Faith-Based Investment
In the company’s third-quarter earnings report, VinFast posted revenue of $343 million. That’s up 159% on a year-over-year basis. On paper, that sounds well and fine. However, its net loss widened 33.7% to $623 million. Put another way, VFS stock symbolizes a faith-based investment.
Like it or not, the harsh reality of the broader automotive sector is that it imposes a capital-intensive profile. So, it’s no surprise that the previously mentioned EV price war hurt so many startups in the space. Many enterprises are already struggling as is. Adding competitive pressures doesn’t help.
Also, it should be pointed out that VFS stock isn’t cheap. Trading hands at 16x trailing-year sales, that’s well above the sector median stat of only 2.05x. Essentially, you’ve got to believe wholeheartedly in Ives’ thesis.
What is the Price Target for VFS Stock?
Turning to Wall Street, VFS stock has a Moderate Buy consensus rating based on two Buys, zero Holds, and zero Sell ratings. The average VFS stock price target is $9.50, implying 44.82% upside potential.
The Takeaway: VFS Stock Could be a Speculative Surprise
Under a normal assessment, it’s difficult to look at VinFast as a reliable idea. Having lost so much value in the market, the company also faces severe industry pressures. Nevertheless, Dan Ives’ hands-on view and subsequent credibility boost of the enterprise justifies at least a second look. And underneath the hood, the attractive pricing and warranty combo could help move the needle for VFS stock.
