The Rivian (NASDAQ:RIVN) initial public offering reiterates what investors already know about EVs. That the momentum is not going to stop. Since going public a week ago, RIVN stock is up more than 120% and it just became the third largest automaker by market cap.
Rivian’s IPO was priced at $78 per share. With shares in high demand, they opened at $106.75 on Nov. 10 This gave the company an implied valuation of $91 billion.
While the stock slipped on its first day as a publically traded company, it still ended the day with a valuation of around $86 billion, making it the biggest IPO since 2014.
The message here is clear and growing louder: EV stocks are much more attractive than traditional automakers.
Rivian Leaps to the Head of the Pack
Traditional auto manufacturers are already being outpaced by EV makers in terms of market capitalization.
One of the big headlines from Rivian’s IPO was that it gave the company a valuation that was larger than that of Ford (NYSE:F). No matter that Ford recorded near $116 billion in sales last year and Rivian is a pre-revenue company that launched its first vehicle in September.
And after the run-up in RIVN stock over the past week, it now has the third-largest market cap of any automaker, following Tesla (NASDAQ:TSLA) and Toyota (NYSE:TM), the only traditional vehicle manufacturer to outrank Rivian in terms of valuation.
I believe the fact that EV makers now hold two of the top three market capitalization spots indicates EV adoption is at a tipping point.
Investors are proving they’re willing to pay up for EV companies, and traditional automakers like Ford and General Motors (NYSE: GM) are taking note. They are realigning their product mix to include EVs, proving this is no flash in the pan.
Right Time and Place
Rivian is perfectly positioned to capitalize on a confluence of industry tailwinds.
For starters, the company’s two consumer vehicles are in high-demand, high-margin segments of the automobile market. Its R1T electric truck is already out, and its R1S SUV is slated for a December release.
As the company notes in its prospectus: “Trucks and SUVs comprise over 70% of new vehicle sales in the United States and account for most of the profits generated by incumbent automobile manufacturers.”
Rivian said it already had 48,390 preorders for the R1T and the R1S, so there’s clearly pent-up demand.
The company is also set to capitalize on demand for delivery vehicles with its electric delivery van, set to launch in December. Much has been made of Rivian’s partnership with Amazon (NASDAQ:AMZN), and for good reason. Rivian is expected to deliver 100,000 of its EDVs to Amazon by 2025.
The company’s factory in Normal, Ill., is capable of producing 150,000 vehicles annually. But management plans to expand that factory’s footprint and build additional manufacturing sites both domestically and internationally.
The Bottom Line on RIVN Stock
Rivian is clearly an exciting company with products that take advantage of current trends. However, it’s too early to jump into RIVN stock.
Investors should wait until the post-IPO euphoria dies down and we see some actual revenue figures next quarter. At that time, the dust should have settled but a good deal of upside is likely to remain.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
