If you’re the opposite, the fact that it’s lost 32% of its value in 2022, and is testing its $50 all-time low, suggests now is not the time to be risk-on with your electric vehicle (EV) investments, or at least this one.
While I wouldn’t be surprised if RIVN were to test $50 in the coming weeks — as I write this on Wednesday, it’s down almost 8% on the day — I think it makes sense for me to revisit some of the reasons I thought it was a lousy IPO when it went public in this past November.
Perhaps, I’ll change my mind about the company and suggest it’s a long-term buy. Or, maybe I won’t. I guess we’ll see.
RIVN Stock Still Isn’t a Buy
That “beep-beep-beep” you’re hearing is the warning sound of RIVN stock backing up to new lows.
Rivian went public on Nov. 9, 2021, selling 153 million shares of RIVN stock at the aforementioned $78. It gained 29.1% on its first day of trading. A week later, it hit its all-time high of $179.47. However, it’s lost 64% of its value in the 11 weeks since.
A couple of weeks after its IPO, I wrote the 10 Reasons Not to Buy RIVN Stock Following the Rivian IPO.
As I look back at the Nov. 22 column, three of my points really stand out.
Buy Ford and Amazon
Ford (NYSE:F) has gone sideways over the last eight weeks, while Amazon (NASDAQ:AMZN) has lost 16% of its value. Long-term, however, I think it’s fair to say that these two ought to be able to deliver healthy returns with far less risk.
As two of the biggest backers of Rivian, I thought it was a much safer way to play the EV startup. Amazon recently agreed to buy battery-electric delivery vans from Stellantis (NYSE:STLA). While Amazon is expected to take delivery of 10,000 Rivian EV delivery vans by the end of 2022, the remaining 90,000 could be in jeopardy.
I’m glad I suggested a safer alternative.
The Bro Culture Troubles Me
If there’s one thing I can’t stand in business, it’s men thinking they own all the good ideas, and women can’t compete. They can and they do, more often than not delivering better results than us men.
Essentially, a former executive, Laura Schwab, is suing the company for being left out of meetings related to her job as Rivian’s VP of Sales and Marketing. It hasn’t become a big deal… yet. To date, nothing of consequence has been reported on the matter. However, should she be successful in her lawsuit, my guess is the CEO and board will have some explaining to do with shareholders.
Until then, we wait.
RIVN Stock Not Worth $100
I mentioned in my argument that when Tesla (NASDAQ:TSLA) went public in 2010, it delivered approximately 1,500 vehicles that year. It was worth $1.7 billion or $1.13 million per delivery. Rivian was projected to deliver 1,000 vehicles last year. Not quite. It delivered 915.
Based on its current market cap of $57.5 billion, that’s $62.8 million per delivery or 56x what Tesla got in its debut year. I’m sorry, but that makes no sense.
What’s the Upside?
InvestorPlace’s Eddie Pan recently discussed some of the reasons why my analogy comparing Tesla and Rivian’s valuations at the time they went public might not be appropriate.
He focused on Credit Suisse analyst Dan Levy’s comments about the EV startup:
“Levy explained that Tesla does not have to tackle challenges related to legacy automakers, such as switching costs from gasoline vehicles to EVs. Accordingly, as a pure-play EV company, Rivian will not have to face these challenges either,” Pan wrote earlier this week.
“The analyst also highlighted that the transition from internal combustion engine (ICE) vehicles to EVs is well underway, which should benefit Rivian as well.”
To my credit, I did say that Rivian exists in a much more advanced marketplace for EVs, so it makes sense for it to get a bigger valuation at the same stage of development.
Pan then provided readers with three analyst target prices for RIVN stock ranging from a low of $130 to a high of $145. Those three are chanting the mantra of “industry-leading technology.”
I would agree that the potential for Rivian is tremendous.
However, the elephant is still in the room. It has a nine-month operating loss of $1.77 billion on $1 million in revenue. While the fourth quarter will see much higher revenue numbers, the operating losses will also be higher when they are revealed in mid March.
If I had to buy RIVN stock, I would definitely try to get it in the $50s. I don’t think it’s finished falling.
And as I said in November, I think there are better EV buys.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.