With Rivian Stock At $62, Should You Buy Or Wait For A Better Entry Point?

RIVN: Rivian Automotive, Inc.  logo
RIVN
Rivian Automotive, Inc.

Electric pick-up truck startup Rivian stock (NASDAQ: RIVN) has stabilized a bit after seeing a big sell-off since its November IPO. While the stock tested lows of about $54 per share in late January, it has rallied by almost 15% since then to about $62 per share, currently. So what are some of the recent developments for Rivian? EV stocks, in general, have done well recently, as oil prices have surged to levels of over $100 amid the ongoing war between Russia and Ukraine. The current issues could make countries reduce their dependence on Russian oil and gas, potentially hastening the transition to electric vehicles. Separately, Rivian’s CEO indicated at a conference that the company was targeting a 10% market share in the EV market by 2030. Although this is a very aggressive goal, considering that Rivian produced just about 1,000 vehicles last year, it could signal the company’s confidence in its product, which has been very well-reviewed.

So do the recent developments make Rivian stock a buy at current levels of $62? While Rivian partly justifies its premium valuation considering its solid products, including the R1T truck, which was awarded the 2022 MotorTrend Truck of the Year, the stock looks a bit expensive from a relative standpoint. For example, Ford (NYSE:F) , has a market cap of $67 billion, just $10 billion more than Rivian, despite its sizeable capacity (over 4 million vehicles delivered last year) and its relatively compelling EV line-up, which includes an electric version of its iconic F-150 truck. The new F-150 Lightning has seen 200,000 nonbinding reservations, compared to Rivian which had about 71,000 pre-orders as of mid-December. Similarly, China’s fast-growing premium EV player Nio, which is expected to post revenues of around $10 billion in 2022, is valued at just about $35 billion, giving it a price to sales multiple of about 3.5x, compared to Rivian which trades at about 16x consensus 2022 revenues.

We think there will almost certainly be better entry points for Rivian stock in the coming months. The company’s post IPO stock lock-up ends in May and this could improve the supply of the stock, potentially impacting prices. Moreover, it’s quite likely that the company will face hiccups as it looks to scale to its production target of 150,000 EVs a year by 2023 at its Normal, Illinois, plant. We saw this in Tesla’s case as well, with the stock witnessing drawdowns of close to 50% back in 2019 when it faced production ramp issues and liquidity concerns. Moreover, the semiconductor and component supply issues seen through the post-Covid re-opening could persist through 2022 as well, potentially impacting the company. For example, on Monday, Rivian’s fellow EV upstart Lucid slashed its 2022 production guidance citing “extraordinary supply chain and logistics” issues. We could get more color on this when Rivian publishes its earnings next week.

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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.

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

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 Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 RIVN Return -8% -40% -52%
 S&P 500 Return -1% -10% 92%
 Trefis MS Portfolio Return 0% -11% 252%

[1] Month-to-date and year-to-date as of 3/2/2022
[2] Cumulative total returns since the end of 2016

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