Down 50%, is Rivian stock a no-brainer buy?

Stuart Blair — Mon, 10 Jan 2022 08:24:21 +0000

Rivian (NASDAQ: RIVN) stock has had a volatile start to life as a public company since its IPO last November. Indeed, after reaching highs of $172 a few days after its IPO, the electric vehicle (EV) stock has since fallen back to around $86. This is a 50% decline. As such, after this large fall-back, can Rivian stock soar or is this the start of a major decline?

Recent developments

There have been several reasons why Rivian stock has fallen so significantly recently. Firstly, the company recently indicated that production for 2021 was going to be below its initial target of 1,200 vehicles. This led to some concerns about the firm’s manufacturing capabilities, especially as it’s such a young company.

Most recently, it was also announced that Amazon, Rivian’s second-largest shareholder, stated that it would buy electric delivery vans from Chrysler owner Stellantis. Although this does not directly jeopardise Amazon’s deal to buy 100,000 delivery vans from Rivian, it does add some extra competition. Rivian’s deal with Amazon was one reason for its high valuation, and therefore, it’s no surprise that this recent development has had such a detrimental effect on the share price.

Even so, there are still plenty of positives for the EV company. For example, it recently announced a new $5bn production plant in Georgia, which should be able to assemble around 400,000 vehicles annually. This may help offset any investor worries about the firm’s manufacturing capabilities. But production at this plant is not forecast to begin until 2024.

The company’s R1T pick-up truck was also awarded the 2022 MotorTrend Truck of the Year, one of the most sought-after awards in the automotive industry. This referred to it as the “most remarkable pick-up truck… ever driven”. As such, there is hope it will have a bright future.

Long-term future

The valuation of Rivian stock is solely dependent on its future prospects. In fact, it has barely started any commercial operations, making revenues of just $1m for the three months ending 30 September 2021. In the same period, it recorded losses of $776m, mainly due to research and development costs and other general expenses. So far, Rivian only has three vehicles as well. Considering that it has a market cap of around $80bn, around the same as Daimler, it may seem somewhat overpriced.

But future demand for products seems strong and this will hopefully allow it to fulfil its potential. Indeed, pre-orders for its R1T pick-up truck recently rose from 48,000 at the end of the third quarter to around 71,000 by mid-December.

What am I doing about Rivian stock?

Right now, I’m not going to buy any shares. I feel that its $80bn valuation cannot be justified. This is especially true considering that it’s facing competition from both Tesla and Ford, which are also releasing EV trucks. Even so, future potential does seem extremely strong, and as a long-term buy, Rivian could be a top performer. This means that if it falls back further, I’ll be far more tempted, and it could be a no-brainer buy. Therefore, I’ll be keeping a close eye on the stock.

The post Down 50%, is Rivian stock a no-brainer buy? appeared first on The Twelfth Magpie.

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Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Could this electric vehicle stock explode in 2022?

Dylan Hood — Thu, 06 Jan 2022 08:50:08 +0000

Electric vehicle (EV) stocks had a pretty mixed time throughout 2021. Some soared to all-time highs, while others suffered crippling declines. One EV stock to enter the market was Rivian (NASDAQ: RIVN).

Rivian went public on November 10 with its shares priced at $78. In the seven days after its IPO, the shares skyrocketed to $172. Since then, the share price has calmed down, currently floating around the $92 mark. This still gives Rivian a whopping $83bn market cap. Does it have the potential to surpass that level in 2022? Let’s take a look.

What is Rivian?

As mentioned, Rivian is an EV manufacturer. The company currently offers two models — a pick-up truck and an SUV. These are being built on what’s known as a ‘skateboard’ platform, a type of EV base chassis that houses the majority of the vehicle’s internal components. This is mass-produced and then used as a foundation to build different models, helping save on costs.

This is one factor that gives me encouragement that the high demand for Rivian vehicles can be met in 2022. What’s more, CEO R.J Scaringe announced he believed that Rivian would have the capacity to produce 1m units by 2030. For context, those are the sort of numbers that Tesla currently produces.

At present Rivian has one manufacturing plant located in Illinois that’s equipped for maximum production of 150,000 units annually. If it can reach this sort of capacity by the tail end of this year, it would really put it on the global EV map.

However, as my fellow Fool Rupert Hargreaves pointed out, Rivian had informed the market that it would struggle to meet its initial target of 1,200 vehicles for Q4 2021. This doesn’t fill me with confidence moving into 2022.

Will Rivian stock explode?

The EV market shows no sign of slowing down over the coming years. If Rivian can position itself right, it could be in a position to take huge advantage of this.

However, more fundamentally, there are some issues I have with Rivian and its current share price. Firstly, despite its $83bn market cap, the firm is yet to make a penny. For context, Ford currently has a market cap of $80bn and delivered $127bn in revenue for FY20. This vast overvaluing worries me and makes me think we could see a big drop in the Rivian stock price during 2022.

In addition to this, Rivian has competition that is far ahead of its current capacity. Obviously, Tesla is the standout here. However, other smaller EV firms like NIO and Xpeng have substantially higher capacity and are producing revenues. Yet both are trading under the $50 mark. This again leads me to question Rivian’s current valuation.

The verdict

In my opinion, the stock seems vastly overvalued considering its fundamentals. The company’s momentum has already begun to slow, and I don’t see this changing going into 2022. Therefore, I don’t see Rivian stock exploding in 2022. I think there are much more enticing EV stocks on the market and hence, I won’t be adding Rivian to my portfolio today.

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