At first glance, Vietnam’s electric vehicle manufacturer VinFast (VFS) presents itself as a disruptor in the industry. Offering a viable alternative to Tesla across various price points, this upstart EV specialist has the potential to capture the attention of weary consumers. However, amidst a struggling industry landscape, the recent surge in VFS stock cannot be overlooked.
The latest market activity speaks volumes. On Monday, VFS stock witnessed remarkable interest, closing at $6.32 with a 29.51% increase from the previous session. Over the past month, shares have soared by over 160%. Not surprisingly, a surge in call options activity has sparked speculation of further upticks.
Conversely, VFS stock has only seen an 18% gain over the past six months. In the last 52 weeks, it has shed nearly 83% of its equity value. How should potential investors navigate this dynamic backdrop? Let’s delve into the pros and cons.
Volatile Options Market Shines a Light on VFS Stock
The fervor surrounding VFS stock has spilled over into the derivatives market, setting the stage for intriguing speculations. VinFast emerged as a standout in Barchart’s unusual stock options volume screener. This tool provides retail investors with insights into market trends driven by professional traders.
After the closing bell on May 20, the total options volume reached 48,751 contracts against an open interest of 117,391 contracts. This represented a significant 454.05% surge from the average volume of the past month. Specifically, call options volume reached 34,007 contracts, surpassing put options volume at 14,744 contracts.
With a put/call volume ratio of 0.43, indicating a bullish sentiment as more traders are opting for calls over puts, institutional investors seem to favor bullish positions. Interestingly, among the top three transactions displaying either bullish or bearish attitudes, the pessimists marginally held the upper hand in total premiums paid – $48,000 versus $46,500.
Advantages of Investing in VinFast Stock
One compelling reason to consider VFS stock is the ongoing meme trade momentum. As witnessed with AMC Entertainment and other popular meme stocks, retail traders continue to rally behind struggling companies. VinFast seems to be riding this wave of enthusiasm.
Additionally, the company’s short interest, currently standing at 14.76% of the float, could fuel further upside. As short sellers cover their positions by buying shares, this activity exerts upward pressure on the stock, benefiting bullish VFS speculators.
Disadvantages of the Electric Vehicle Manufacturer
Despite significant growth, VinFast is grappling with widening losses. Presently, its retained loss amounts to around $7.25 billion. Though this figure may improve as sales expand, success is far from guaranteed in the fiercely competitive EV market.
Another concerning factor is the capital-intensive nature of the automotive industry, with cash flow consistently remaining a challenge for players. As highlighted by Barchart’s partner, The Motley Fool, VinFast is rapidly losing money, indicating potential future dilution, which could spell trouble for VFS stock.
Navigating VFS Investment
Considering these factors, the approach to VFS stock hinges on individual objectives. While a long-term investment in VinFast may pose challenges due to its cash burn and industry dynamics, dabbling in short-term call options could be a tempting prospect.
For instance, the Sep 20 ’24 7.00 Call option, priced at $80 for control over 100 shares on Monday, may hold appeal, given that VFS stock would need to surpass $7.80 for the call to turn profitable based solely on intrinsic value. However, a key resistance level looms around $8, which could present an interesting juncture for speculators, albeit with a cautious eye on market movements.
