VinFast share price has dived: It could be the next penny stock

VinFast (NASDAQ: VFS) stock price continued its freefall this week as demand for the shares plunged. The shares peaked at $92.86 in August and then plunged to a low of $7.23, the lowest level on record. This plunge brought its total market cap to more than $16.8 billion.

VinFast is a Vietnamese company with more than 14,000 employees. It is building electric cars as it seeks to become a major rival to companies like Tesla, Rivian, Nio, and Xpeng. 

The company went public a few months ago and its stock surged, pushing its market cap to over $200 billion. At the time, I warned that the shares would have a similar price action with AMTD Idea.

AMTD is a Hong Kong-based company that went public and surged. It then recoiled and became a penny stock. VinFast stock is facing three key challenges going forward.

First, the company is losing popularity among investors as evidenced by the relatively low volume and Google searches. Second, VinFast is in a highly competitive industry that is going through a major slowdown.

There are now hundreds of EV companies, with Tesla being the market leader. Most of these firms have now been forced to slash prices in a bid to boost their market share. For example, Tesla recently cut prices in the US as it seeks to meet its production target.

Third, while VinFast is growing, there are signs that the company will continue bleeding cash in the next few years. 

The most recent results showed that the company’s deliveries rose by 5% QoQ in Q3 to 10,027 units. That was a big jump since it made just 153 deliveries in the same quarter in 2022. It expects to deliver between 40k and 50k vehicles this year.

EV companies bleed cash years after they start delivering their vehicles. For example, Rivian burns $33k for every car it sells. The same will happen with VinFast as it seeks to expand in the US.

Further, there are signs that VinFast insiders have started dumping their shares. It is never a good sign when insider sell stock in a company

VinFast stock also has valuation concerns. The company is valued at over $16 billion, slightly lower than Rivian’s $17 billion. It is also bigger than Lucid, which is valued at $11 billion.

Regular readers know that I have been quite bearish on VFS stock. I warned that it would become the next AMTD in this article. This view was correct as the stock has plunged to below $10. On the daily chart, it has moved below the 50-day moving average and the pre-SPAC merger.

The Relative Strength Index (RSI) has crashed below the oversold level. Despite this, I expect the VinFast stock price will continue falling as sellers target the key support at $5. I can’t rule out a situation where it becomes a penny stock.

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