Electric pick-up startup Rivian stock (NASDAQ: RIVN) has declined by about 5% over the last month and remains down by about 68% this year. Rivian recently posted a mixed set of Q2 2022 results, with its adjusted loss coming in at a wider than expected $1.62 per share partly due to inflation and supply chain challenges. The company also revised profit guidance for the full year, projecting an EBITDA loss of $5.45 billion, compared to its previous estimate of $4.75 billion, However, Rivian’s production is scaling up as planned, with the company manufacturing 4,401 vehicles in the second quarter, up from 2,553 in the Q1. The company also essentially reiterated its full-year delivery guidance indicating that it would ship a total of 25,000 vehicles for the year. Demand for the Rivian vehicles is holding up despite the company’s move to hike prices by over 15% earlier this year. Rivian had about 98,000 orders for its R1 EVs as of the end of June, up from 90,000 orders as of early May.
Although we’d 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 think the stock is a fairly good value at current levels of about $30 per share. Now Rivian’s losses and high cash burn are a concern, but the company is well-capitalized, with net cash standing at over $15 billion as of the most recent quarter. In fact, Rivian’s market cap currently stands at a little over $29 billion, implying that the market is currently valuing the company’s core business at just about $14 billion. Based on a 2022 consensus revenue estimate of about $1.85 billion, Rivian’s core business is valued at just about 7.5x sales, which is reasonable for a fast-growing company that offers a compelling product.
There are also indicators that the broader semiconductor shortage could also be easing and this might eventually 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.
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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. While the theme outperformed over the last three years, it remains down by about -26% year-to-date.
|S&P 500 Return||-2%||-15%||81%|
|Trefis Multi-Strategy Portfolio||-2%||-15%||239%|
 Month-to-date and year-to-date as of 8/29/2022
 Cumulative total returns since the end of 2016