There has been one surefire way to lose money in the stock market over the past couple of years…
Buying into the hype about new electric vehicle (EV) stocks has been pure poison for investor portfolios.
In June 2020, I warned investors to stay far away from heavy-duty electric truck maker Nikola Corp. (Nasdaq: NKLA). My issue with Nikola was its stock market valuation. The company had a $30 billion valuation but no profits, no cash flow and no revenue!
Nikola’s stock has since been a disaster, down a horrifying 98%.
After Nikola came another exciting EV manufacturer, Rivian (Nasdaq: RIVN).
Again, its valuation was ridiculous.
In October 2021, just before Rivian went public, I urged readers to avoid its stock.
Rivian’s $70 billion-plus valuation didn’t match up with the fact that the company hadn’t generated any profits or revenue!
Like Nikola’s, Rivian’s stock has since collapsed, now down more than 80%.
This week, I’m warning Wealthy Retirement readers about another EV manufacturer that the market has bid up to a nonsensical valuation.
This time, though, the valuation is even more absurd.
The company is VinFast Auto (Nasdaq: VFS), which is a Vietnam-based manufacturer of EVs.
VinFast started out as a manufacturer of electric scooters. From there, the company expanded into manufacturing electric SUVs. It is growing quite fast, but so far, the business has done nothing but burn through cash.
Fundamentally, VinFast has never turned a profit. To date, the company has incurred a cumulative loss of $6 billion.
Against that profitless existence, VinFast’s market valuation (enterprise value) as I write this is a staggering $166 billion! How can that be?!
For perspective, consider that VinFast is valued at a higher enterprise value than both Ford (NYSE: F) and General Motors (NYSE: GM).
While VinFast has never posted a profit, last year alone, General Motors and Ford generated company-adjusted free cash flows of just under $20 billion and $9 billion, respectively.
Last year, VinFast delivered a grand total of 7,400 EVs. This year, the company hopes to see that number increase to 30,000. That’s nice growth, but for a business valued at $166 billion… that is a minuscule number.
For some perspective on how tiny that is, Ford sold 4.2 million and General Motors sold 5.9 million cars last year. Both of these companies sold more cars every day last year than VinFast did in the entire year.
It’s unbelievable that the stock prices of Nikola and Rivian have imploded, yet the market is pushing another EV maker up to a ridiculous valuation. VinFast may turn out to be a great company, but its stock is going to come crashing back to earth. This stock should be selling at a fraction of where it currently is.
The Value Meter rates VinFast as “Extremely Overvalued.” And I don’t think “extremely” does the overvaluation justice in this case.
— Jody Chudley
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Source: Wealthy Retirement