AI-Centric Luxury EV Adoption Will Drive Long-Term Earnings Power And Margin Expansion

Catalysts

About Faraday Future Intelligent Electric

Faraday Future Intelligent Electric designs and manufactures AI-centric ultra luxury and premium electric vehicles supported by a connected mobility, digital asset and services ecosystem.

What are the underlying business or industry changes driving this perspective?

• Momentum in AI driven in vehicle experiences, including the FF Super EAI FACE System and embodied AI agent, positions FX Super One and FF 91 to capture high value software and services revenue layered on top of vehicle sales, which can structurally enhance gross margin and long term earnings power.
• Rapid expansion of global EV adoption and supportive clean energy policies in the U.S., Middle East and China aligns with FF’s three pole strategy and new plants in Hanford and Ras Al Khaimah, creating operating leverage as volumes scale and factory utilization improves, which can help narrow operating losses and support margin recovery.
• Over 11,000 nonrefundable B2B FX Super One preorders, early traction in the U.A.E. and a B2B2C co creation model with dealers and sharing platforms provide a visible multi year demand pipeline that can support revenue growth as preorders convert into binding orders and deliveries ramp.
• Ongoing localization of production, progress on FMVSS testing, maturing supply chain partnerships and the rollout of a manufacturing management system may reduce unit costs and working capital intensity over time, supporting better net margins as FX Super One moves from preproduction to scaled output.
• Development of a dual flywheel strategy that links EAI EVs with crypto and digital asset platforms, including the Qualigen investment, can create new high margin fee and platform income streams, diversifying earnings beyond vehicle sales and potentially affecting the company’s valuation multiple relative to traditional automakers.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Faraday Future Intelligent Electric's revenue will grow by 606.3% annually over the next 3 years.
• Analysts are not forecasting that Faraday Future Intelligent Electric will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Faraday Future Intelligent Electric's profit margin will increase from -75050.3% to the average US Auto industry of 5.0% in 3 years.
• If Faraday Future Intelligent Electric's profit margin were to converge on the industry average, you could expect earnings to reach $11.2 million (and earnings per share of $0.05) by about December 2028, up from $-481.8 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 131.3x on those 2028 earnings, up from -0.4x today. This future PE is greater than the current PE for the US Auto industry at 18.9x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.5%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company remains deeply loss making with loss from operations increasing to $206.8 million in the quarter and operating cash outflows rising year on year. If FX Super One and FF 91 volumes scale more slowly than expected, this sustained cash burn could force dilutive financing or constrain execution, which could pressure future earnings and net margins.
• Over 11,000 FX Super One reservations are explicitly nonbinding and many deposits are refundable on the B2C side. If macro conditions, luxury EV competition or AI novelty fatigue reduce conversion rates, reported preorder momentum may not translate into actual deliveries, which could limit long-term revenue growth.
• The strategy depends on rapid industrialization across Hanford and the Ras Al Khaimah facility plus completion of Federal Motor Vehicle Safety Standards testing. Any delays, quality issues or tariff driven cost inflation could raise unit costs and slow deliveries, which could weigh on gross margin and operating margin over time.
• The dual flywheel plan that links EAI EVs with crypto and digital asset platforms, including the Qualigen investment, exposes the company to regulatory shifts and volatility in digital asset markets. If these initiatives fail to gain traction or face policy pushback, expected high margin platform income may not materialize, which could limit diversification of earnings.
• The ultra luxury AI centric positioning targets a narrow high net worth segment in markets like the U.S. and U.A.E. If long-term EV adoption and regulatory support skew toward mass market, lower priced models, FX Super One and FF 91 may struggle to achieve the scale needed to absorb heavy R&D and fixed manufacturing costs, which could constrain revenue scale and long-run net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $5.0 for Faraday Future Intelligent Electric based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $226.2 million, earnings will come to $11.2 million, and it would be trading on a PE ratio of 131.3x, assuming you use a discount rate of 12.5%.
  
• Given the current share price of $1.13, the analyst price target of $5.0 is 77.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.