Rivian Stock Down 40% From Its Highs, But Don’t Buy Yet

by Trefis Team
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Electric pick-up truck startup Rivian stock (NASDAQ: RIVN) declined by 13% over the past month to levels of about $101 per share currently. This compares to the S&P 500 which remains up by about 4.5% over the same period. The stock also remains down by about 40% from all-time highs seen in mid-November. There are a couple of factors that have weighed the stock down. Firstly, the company indicated that its production for 2021 was likely to be slightly short of its initial target of 1,200 vehicles, making investors a bit nervous about the young company’s manufacturing ramp. Moreover, EV stocks, in general, had a mixed December, amid concerns of rising interest rates and a surge in U.S. Covid-19 cases. That being said, there have also been a couple of positive developments for Rivian. The company announced a new $5 billion production plant in Georgia that could assemble as many as 400,000 vehicles annually at peak output, with production likely to commence from 2024. Demand for Rivian’s vehicles also remains quite strong, with the company noting that preorders for its R1T pickup truck rose from around 48,000 at the end of Q3 2021 to about 71,000 as of mid-December.

So does the recent decline present a buying opportunity for Rivian stock? We don’t think so. Rivian is valued at over $90 billion, which is in the ballpark of GM and Ford’s market capitalization, despite the fact that it has barely started commercial operations. While the company’s product is apparently very strong, other players such as Tesla (NASDAQ:TSLA) and Ford (NYSE:F) also have compelling electric trucks in the offing. Tesla has more than 1.25 million pre-orders for its cyber truck, while Ford has received close to 200,000 nonbinding reservations for its upcoming F-150 electric truck. Moreover, scaling production isn’t easy for young automotive companies like Rivian. We’ve seen this in Tesla’s case, as well. Although we aren’t saying that Rivian won’t be successful with its production ramp-up, there will very likely be issues along the way, and we could see much more attractive entry points for the stock in the coming years.

Want exposure to the electrification of the automotive industry, without picking individual EV brands? Check out our theme on EV Component Supplier Stocks for a list of companies that stand to benefit from the big EV transition. Also, check out our theme of Automobile Stocks which includes legacy automakers and pure-play EV stocks.

Below you’ll find our previous coverage of Rivian stock where you can track our view over time.

[12/14/2021] What’s Happening With Rivian Stock?

Electric pick-up truck startup Rivian (NASDAQ:RIVN) went public in early November and currently trades at about $119 per share, marking an increase of about 50% from its IPO price. However, the stock remains down by about 30% from all-time highs of about $172. So what are some of the recent developments driving Rivian stock?

The quiet period on Rivian stock following its IPO recently expired, meaning that analysts are now free to rate the stock and a majority of brokerages appear to be bullish, with the average price target standing at about $134 per share, about 13% ahead of the current market price. Separately, Rivian’s R1T truck was awarded the 2022 MotorTrend Truck of the Year, which is seen as one of the most coveted awards in the auto industry. The publication referred to the vehicles as “the most remarkable truck” it has driven while commending Rivian for its engineering excellence. There have been a couple of negative developments as well.  In mid-November, Rivian and Ford announced that they were no longer planning to jointly develop electric vehicles. The potentially more hawkish stance by the U.S. Federal Reserve in recent weeks is also likely to hurt high growth stocks and the impact on Rivian could be particularly pronounced, given that the company is still at the very early stages of growth.

So what’s our view of Rivian stock? We remain cautious about Rivian. While the company certainly has a lot going for it, including a solid product that caters to one of the most profitable segments of the auto industry, and a large anchor customer in Amazon, which has ordered 100,000 delivery vans with Rivian to be delivered by 2030, we think there is much risk at Rivian’s current valuation. Scaling production isn’t easy for young automotive companies, and we’ve seen this in Tesla’s case as well. Although we aren’t saying that Rivian won’t be successful with its ramp, there will quite likely be hiccups along the way, and we could see more attractive entry points for the stock in the coming years. Moreover, there might be cheaper ways to play the electric pickup truck space. For example, Ford stock (NYSE:F), which is valued at about $82 billion (versus $100 billion for Rivian), has big EV ambitions and early interest in its new F-150 lightning EV has been exceedingly strong with the company logging about 200,000 reservations, versus about 55,000 pre-orders for Rivian. Ford’s trucks will likely have better brand loyalty and the company also has a proven manufacturing track record.

Want exposure to the electrification of the automotive industry, without picking individual EV brands? Check out our theme on EV Component Supplier Stocks for a list of companies that stand to benefit from the big EV transition.

[11/8/2021] Avoid The Rivian IPO. Bet On EV Suppliers Instead?

Electric pick-up truck startup Rivian is looking to raise about $10 billion via its IPO this week, with its shares priced at between $72 to $74,  per its latest SEC filing, valuing the company at upward of $60 billion.  So, is the company a good bet for investors? We don’t think so. While EV stocks are the hottest momentum play in the current market, given the urgency to fight climate change and the solid returns provided by EV bellwether Tesla (NASDAQ:TSLA), we think Rivian’s stock is not worth investing in at the asking price. Let’s take a look at Rivian’s business a bit closer to see why.

Rivian has a couple of things going for it. It has marquee early investors including Amazon, which holds a 20% plus stake, and Ford. The company has two vehicles in its lineup, including the R1T pickup truck and the R1S SUV, which will cater to the most lucrative segments of the automotive market. SUVs and cross-overs count as the most popular vehicle body style in the U.S., while pickups have among the thickest margins. Moreover, the company is also developing a delivery van for Amazon, which plans to deploy about 10,000 vans by 2022 and 100,000 vans by 2030.

However, we have multiple concerns about investing in the IPO. Firstly, it’s not clear what the company’s competitive advantage really is. Tesla, for example, has innovated on the battery, self-driving, and software front while building production capacity relatively quickly. Competition in the electric truck market is also set to intensify.  For example, Tesla which has largely focused on cars and luxury SUVs thus far is looking to enter the pickup market with its Cybertruck going into production from 2022. The Cybertruck, which reportedly has over half a million pre-orders already, is likely to be priced starting at around $40,000 compared to Rivian’s offering which will begin at a much steeper $67,500. Ford is also going to make an electric version of its F-150 pickup, the best-selling U.S. automobile, and the initial demand for the vehicle has also been robust. It’s safe to assume that customers will have several other electric pick-ups and SUVs to choose from in the coming years. The $60 plus billion valuations Rivian is seeking is ahead of established auto companies such as Honda and approaches Ford’s roughly $70 billion market cap. This comes despite the fact that the company only began to produce its vehicles a few months ago and expects deliveries of just 1,025 this year. There’s too much price risk for the stock at these levels, in our opinion.

Although electric vehicles are the future, investing in EV stocks is somewhat tricky at this juncture, considering the rich valuations of pure-play EV stocks and the relatively low barriers to entry into the EV market, which is seeing a slew of new entrants competing for share. Electric vehicle supplier stocks, on the other hand, should be a safer way to play the broader electrification of the auto industry, without having to pick individual OEM stocks. Check out our theme on EV Component Supplier Stocks for more details.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Jan 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 RIVN Return -2% -2% -2%
 S&P 500 Return 0% 0% 79%
 Trefis MS Portfolio Return -2% -2% 285%

[1] Month-to-date and year-to-date as of 1/5/2022
[2] Cumulative total returns since 2017

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