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Electric vehicle (EV) manufacturers offer a myriad of benefits beyond an environmentally-friendly profile. This EV stock could easily turn into a darling of Wall Street, but it takes time for assets like these to turn into growth stocks.
Thanks to the surging popularity of EVs, Faraday Future appears poised to disrupt the automotive industry with a production vehicle that could be much more efficient than the gasoline cars that we see today. However, can Faraday Future outpace the combustion engine overnight? Likely not. It takes time for EV automakers like these to take hold, and this is a look at how these assets will fit into your portfolio.
Learn how you can buy Faraday Future (NASDAQ: FFIE) stock and gain exposure to the vehicle market.
When Did Faraday Future IPO?
Faraday Future IPO’d on July 22, 2021 on the NASDAQ to great market demand. With an initial market value of just under $10 per share, the EV company was growing but found it difficult to surpass its IPO price.
Faraday Future Financial History
Faraday Future is currently a pre-revenue company, so it has no sales. You should not mistake this with no earnings as many technology firms fall under this category. But not generating revenue is incredibly problematic for many investors because the underlying company is purely aspirational.
Still, this pesky fact hasn’t stopped Faraday’s management team from thinking big. If the company hits its internal targets, executives anticipate that Faraday will deliver $21.4 billion in revenue and $2.3 billion in earnings before interest, taxes and depreciation or EBITDA.
More importantly, the EV maker enjoys massive backing. After over 6 private funding rounds since August 2017, Faraday amassed a total of $2.4 billion in capital. China Evergrande New Energy Vehicle Group contributed the lion’s share of the funds, investing $2 billion on December 20, 2017.
Faraday will cater first to affluent consumers. Its flagship EV, the FF 91 Futurist, targets those who ordinarily might purchase an “economy model” Lamborghini or Ferrari (NYSE: RACE). With a starting price of $180,000, the Futurist features unparalleled convenience, comfort, technologies and performance.
Faraday Future Potential
On the surface, it’s difficult not to get excited about Faraday. For one thing, its flagship EV accelerates from a standstill to 60 miles per hour in only 2.39 seconds, thanks to its 3 electric motors that churn out 1,050 horsepower.
To put this performance into context, the $215,000 Ferrari Portofino accelerates to the same speed from zero in 3.5 seconds. A 1.1 second gap is a lifetime in the premium automotive world.
EV purchases suit themselves best toward a wealthier clientele. Yes, automakers now offer cheaper EVs thanks to lower battery costs. Even so, the cheapest electric car you can buy from a major manufacturer is the Mini Cooper SE — a subsidiary of BMW — which has a pre-federal tax subsidy price of $30,750. That’s still out of the reach for many U.S. households.
But for the ultra-rich, price is no concern. Should everything go according to plan, Faraday will be a very profitable company, similar to Ferrari.
However, the challenge with going the ultra-luxury route is that Faraday has not yet established social cachet. It’s risky to charge Ferrari prices when you’re an automotive startup.
Lastly, while beauty is in the eye of the beholder, you might not appreciate its aesthetics. Specifically, its side profile appears too symmetrical, which contrasts sharply with popular automotive design.
How to Buy Faraday Future (FFIE) Stock
If you already know how to buy stocks, you’re in luck. The process of participating in the Faraday Future stock is no different than acquiring a garden variety stock.
Step-by-step Guide:
- Pick a brokerage.
If you decide you want to buy Faraday Future stock, you must first pick a brokerage through which you want to conduct your trades. At present, you have several compelling choices, mainly because the rise of mobile trading platforms sparked competition. Most brokers now offer similar incentives, such as commission-free trading.
This leaves your decision-making process down largely to personal preference and your anticipated development in the investment field. For instance, if you work a busy schedule and have limited time to manage your portfolio, then a trading app may be most appropriate. On the other hand, if you want to fine tune your investing craft, then you should choose a full-service platform. - Decide how many shares you want.
Deciding how many shares of Faraday Future you want to purchase mostly is a factor of personal risk tolerance. Financial advisors often recommend that you don’t bet too heavily on speculative or unproven investments.
Whatever that magic number is, you should figure it out prior to your transaction and stick to it. The market sparks many emotions, and the last thing you want is to let emotions be the driver of your trades rather than calm rational thinking. - Choose your order type.
Once you have the above details squared away, you should familiarize yourself with these key market concepts.
• Bid: The bid is the highest price a buyer will offer for a stock. It is always lower than the ask.
• Ask: In contrast, the ask is the lowest price that a seller will accept. It is always higher than the bid.
• Spread: The spread is the difference between the bid and ask price. Principally, the spread represents the risk-reward profile of the market makers, who temporarily places blocks of shares on their books before distributing them to wanting buyers. Narrower bid-ask spreads indicate lower risk and therefore higher liquidity. Wider spreads indicate higher risk, which translates to lower liquidity.
• Limit order: To place an order at a specific price, choose a limit order, which will only execute if the target stock reaches said price. However, the disadvantage here is that no guarantee exists that the stock will reach your predetermined price, possibly leaving the order hanging unfulfilled.
• Market order: To enjoy a guarantee of transaction fulfillment, choose a market order, which automatically executes at the next available price. Be aware that market orders fulfill at rates least favorable to you -- buy orders on the ask, sell orders on the bid.
• Stop-loss order: A stop-loss order is a protective function that automatically exits you out of your holding at either a predetermined price or the next available price. Still, stop-loss orders add some unpredictability to your portfolio due to gap-down sessions, where the opening price of a new session starts much lower than the prior session’s close.
• Stop-limit order: To prevent such surprises, choose a stop-limit order, which only executes at a predetermined price. But note that as with regular limit orders, your stop limit can go unfulfilled if the target stock keeps dropping and never reaches your specified price. - Execute your trade.
To execute your trade, follow these steps for a market order:
• Select action type (buy or sell).
• Enter the shares you want to acquire (or sell).
• Execute the trade.
Placing limit orders follows the same process above but you will need to include your desired execution price.
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Faraday’s Enticing But Risky Future
Leveraging multiple advanced technologies, everyday usability and conveniences and exotic-car-beating performance, Faraday Future represents a welcome addition to the EV marketplace. And its focus on the ultra-wealthy is a wise business choice. If EV sales pick up, the market share this company holds might grow, giving investors a better option as they diversify their EV stocks.
Nevertheless, prospective buyers of this stock should realize that Faraday is a pre-revenue company, and the competition in this space is fierce.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.