News

Shares of electric vehicle (EV) company Faraday Future Intelligent Electric (NASDAQ: FFIE) jumped as much as 50% in trading on Tuesday as investors became more bullish on the company's turnaround plan. The volatile stock lost nearly all of its gains mid-day but closed the day up 30.9%.

Signs of life in EVs

Earlier this week, Rivian signed a deal with Volkswagen that would provide electronic architecture to the larger automaker through a joint venture. VW also made a large investment in Rivian.

This indicated there's at least some appetite for large automakers to partner with smaller rivals that may have technology that would be beneficial. But there's no such deal for Faraday, so any pop in shares is purely speculative.

We also learned this week that Faraday has a plan to regain compliance with Nasdaq that includes up to a 40-for-1 reverse-stock split and the authorization of more shares. This could lead to further dilution for the company in the market.

Survival is the name of the game

Rivian raised money because it needs to build another plant to get to free-cash-flow-positive. Faraday doesn't even have that in sight after reporting $800,000 in revenue in 2023.

As of May 23, 2024, Faraday had about $5 million in cash and burned $278 million in 2023, so that cash won't last long.

Faraday is hoping to survive, and it seems investors are betting some large automaker may turn to the company for technology that would provide a bailout. I think that's doubtful, and today's bounce is part of the volatility of small-cap stocks when they're facing the end of their available funding.

Should you invest $1,000 in Faraday Future Intelligent Electric right now?

Before you buy stock in Faraday Future Intelligent Electric, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Faraday Future Intelligent Electric wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $774,526!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of June 24, 2024

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Volkswagen Ag. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.