How often do you see a stock zoom more than 270% within days of its initial public offering (IPO)? Speculation and momentum often drive such large, erratic moves in stock prices. While a blowout stock market debut may not always be the best buying opportunity, it often does create the perfect time to learn more about a company and see why its stock is rising. One such stock generating a lot of buzz right now is VinFast Auto (VFS -3.35%).
VinFast Auto stock debuted on the Nasdaq Stock Market on Aug. 15 after the company went public through a special purpose acquisition company. In just the past four days as of this writing, the stock is up over 200%.
So what is VinFast Auto and why is the stock on fire? Here's all you need to know.
What is VinFast Auto?
VinFast Auto is an electric vehicle (EV) manufacturer, and what's happening with the stock now is reminiscent of the EV hype of 2021 when stocks like Rivian Automotive and Lucid Group made stellar debuts in the U.S. There's a striking similarity between all three companies: Their first EVs rolled off the assembly line at around the same time, in late 2021. However, VinFast may already have a bigger global presence given its foothold in Vietnam.
VinFast is part of Vietnam's largest conglomerate, Vingroup. It started with e-scooters in 2018 and then built passenger cars and e-buses in the following years. In December 2021, VinFast produced its first all-electric SUV in Vietnam, and by November 2022, it shipped the first batch of its VF 8 SUV to North America.
VinFast wants to be a leader in "the future of smart mobility" through its EV platform, which is why it is expanding in some of the largest EV markets in the world, including the U.S. and Europe. In Vietnam, VinFast is already dominating the passenger EV market with a 50% market share in 2022, according to BMI Research.
VinFast Auto's growth moves and plans
Scaling up production is one of the biggest challenges for any EV start-up, so it's important to know where VinFast stands in terms of production and sales. Here are some numbers you must know:
- Annual production capacity: 300,000 units
- Cumulative e-scooters delivered as of June 30: 182,000 units
- Cumulative electric and internal combustion engine vehicles delivered as of that date: 105,000 units
- Cumulative EVs delivered as of June 30: 18,700 units
- Number of EVs delivered in the first half of 2023: 11,300 units
- Number of EV reservations as of June 30: 26,000 units
VinFast has launched six electric SUVs so far, and barring the VF e34 and VF 5, which are sold only in Vietnam, the other models -- VF 6, VF 7, VF 8, and VF 9 -- will be available for sale in the U.S., Canada, and Europe. The company already has more models in the pipeline.
Image source: VinFast Auto.
In July, VinFast broke ground in North Carolina at what will be its first EV factory outside of Vietnam. The company expects to start production in the U.S. by 2025 with an estimated annual production capacity of 150,000 units.
VinFast also has several stores in Europe, and as of June 30, its global network spanned 245 showrooms, dealers, and workshops for e-scooters and 122 showrooms for electric cars.
These numbers suggest that VinFast isn't a run-of-the-mill company that some may believe it to be. Its production is up and running, and it generated roughly $634 million in revenue in 2022. VinFast, however, has yet to turn a profit -- it had accumulated net losses of nearly $6 billion as of March 31, 2023.
Why VinFast stock rallied over 270% within days of IPO
One of the biggest reasons why VinFast stock surged in the past few days was a crucial update about the range ratings for its new all-electric, full-size SUV, VF 9. On Aug. 21, VinFast said the U.S. Environmental Protection Agency's (EPA) range rating of 291 miles for VF 9 Plus and 330 miles for VF 9 Eco trim had surpassed its initial estimates. VinFast stock doubled that day, and it hasn't stopped moving higher.
Friday morning alone, VinFast's stock is up over 17% as of this writing, taking the stock's cumulative gains in just the past five days to over 240%. With a market capitalization of more than $130 billion now, VinFast stock is much bigger than Ford Motor Company and General Motors combined.
Is VinFast's valuation justified, though? When you see the stock's price-to-sales ratio in comparison to other EV start-ups and legacy automakers, a pretty clear answer emerges.
VFS PS Ratio data by YCharts
For more context, Rivian delivered a little over 20,500 EVs in the first half of 2023. Ford, meanwhile, delivered roughly 25,700 EVs during the period, including F-150 Lightning pickup trucks, Mustang Mach-E, and E-Transit vans.
VinFast may have a strong foothold in its home country, but that factor already appears to be baked into the stock price and there's no knowing yet whether the company will find enough takers for its electric cars in the U.S. and Europe. The EV maker also had a long-term debt of nearly $1.7 billion and cash and cash equivalents of only about $158 million as of March 31. So it's highly likely it'll take more debt or issue shares in the near future to fund growth, especially as it builds its EV factory in North Carolina.
With all of this in consideration, I am going to avoid buying VinFast stock in haste and tread with caution.
