What’s New With Rivian Stock?

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

Electric pick-up startup Rivian stock (NASDAQ: RIVN) has recovered a bit from a long-drawn sell-off, rising by about 12% over the last month and by close to 20% over the last five trading days. So what are some of the trends driving Rivian stock recently? Firstly, Rivian is considering laying off around 5% of its workforce, per a report from Bloomberg, with the layoffs apparently focused on non-manufacturing areas. Rivian’s operating expenses have been elevated, with the company burning about $1.5 billion in cash over Q1 2022 and these cuts could help to reduce costs without impacting production. There are also signs that the company’s production is picking up. Rivian recently announced that it produced 4,401 vehicles over Q2, a 70% sequential increase, and reiterated that it would meet its production target of 25,000 vehicles for this year. There are indicators that the broader semiconductor shortage could also be easing and this might also prove to be a tailwind for the company’s production. Now, although there are concerns about the global economy and broader automotive sales, with most mainstream auto stocks fairing poorly over the last month, Rivian should be somewhat immune to near-term headwinds, given that demand is considerably outstripping supply at this juncture, with the company holding an estimated 90,000 reservations for its premium trucks as of early May.

Although we had been negative on Rivian stock when the company went public in November 2021 due to its lofty valuation, which at one point stood at over $130 per share (translating into a $100 billion-plus market cap), we thought the stock was a great value pick in early May 2022, when it traded at a little over $20 per share. However, we still think the stock is worth a look at its current price of about $30 per share. Although Rivian’s cash burn is a concern, the company is well-capitalized, with net cash holding standing at $16 billion as of the last quarter. In fact, Rivian’s market cap currently stands at a little over $27 billion, implying that the market is currently valuing the company’s core business, at just about $11 billion. Based on a 2022 consensus revenue estimate of about $1.8 billion, Rivian’s core business is valued at just about 6x sales, which is reasonable for a fast-growing company that offers a compelling product.

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. While the theme outperformed over the last three years, it remains down by about -26% year-to-date.

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What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jul 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 RIVN Return 16% -71% -71%
 S&P 500 Return 2% -19% 72%
 Trefis Multi-Strategy Portfolio 3% -20% 213%

[1] Month-to-date and year-to-date as of 7/12/2022
[2] Cumulative total returns since the end of 2016

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