Rivian Automotive (RIVN) rolled out the first all-electric pickup truck, the R1T, on Sept. 14, 2021. On Nov. 9, 2021, the much-anticipated RIVN IPO priced strong. The EV startup had a monster IPO, however shares have fallen well below their IPO price recently, amid an overall market downturn. Rivian now has a market cap of $41.8 billion. Is Rivian stock a good buy?
The Rivian IPO priced an upsized 153 million shares at $78 a share Nov. 9, 2021, above the expected range. The RIVN IPO raised $11.9 billion, giving Rivian an initial valuation of roughly $77 billion. Shares soared to 179.47 on Nov. 16, 2021, but then sold off sharply over the following weeks and months.
Rivian picked a good time to go public, as it is among the few startup EV makers actually producing and delivering vehicles. Lucid Motors (LCID) more than doubled in the first four months after going public in July 2021, as it began deliveries. LCID stock came public via a SPAC merger. LCID stock has since pulled back to around $25.
Rivian announced Dec. 16, 2021, that it will open a vehicle assembly and battery plant near Atlanta. The $5 billion project is slated to break ground in the coming months.
However, local residents oppose the new factory, saying they were assured in 2017 that the area would remain largely rural.
In response, on Feb. 22, 2022, Georgia officials said the state is taking over the controversial development project, which will allow officials to bypass local rezoning hearings. Georgia will take ownership of the 2,000-acre site, to “streamline” the development process, according to a local report.
Next, Rivian plans to open a plant in Europe to start building vehicles by the end of 2023. A site in the U.K. is also possible, as well as locations in continental Europe.
On Dec. 3, 2021, The Financial Times reported that the U.K. was offering Rivian more than 1 billion British pounds — $1.32 billion — to build a plant in Somerset. The 635-acre site could be used for battery production, car assembly or both if the plans are approved, the report said.
Amazon Reveals 18% Stake In Rivian
The Amazon (AMZN)- and Ford-backed Rivian’s R1T beat Tesla and General Motors auto to the punch, as the EV market for electric trucks heats up. But production has been slow, while its R1S SUV has largely been pushed out to spring 2022.
Rivian makes its vehicles at its plant in Normal, Ill. The plant has a production capacity of 150,000 units annually.
The company is prioritizing production of electric vans for Amazon, according to a recent Bloomberg report. Amazon has ordered 100,000 of Rivian’s electric vans. And while Rivian’s R1T pickup has grabbed headlines recently, Amazon’s vans are more likely to be revenue drivers in the near term.
Amazon said on Feb. 2, 2022, that it had a roughly 18% stake in Rivian. However, Amazon is also looking elsewhere to electrify its fleet, On Jan. 5, 2022, Amazon and Stellantis (STLA) said they’re are partnering to develop vehicles with Amazon software in the dashboards. Stellantis will also make electric delivery vans for Amazon.
Billionaire George Soros, Top Pension Funds Invest
Rivian stock has garnered the attention of other top investors too. Billionaire investor George Soros bought nearly 20 million shares of Rivian stock worth $2 billion in the quarter ended Dec. 31, 2021, according to a Feb. 11, 2022, financial filing. The purchase makes Soros Fund Management one of Rivian’s top investors.
The country’s top pension funds are also snapping up Rivian stock. Seven state government employee pension funds including CalPERS, the largest U.S. pension plan, have invested in Rivian, according to a Reuters report. CalPERS, with around $492 billion under management, bought a little more than 305,000 RIVN shares. The $191 billion Teacher Retirement System of Texas fund took a 33,000-share stake in the company.
Shares popped 10% in the days following the news.
Rivian Hikes Prices
Rivian is hiking the price of its R1T electric pickup around 17%, which will increase the base cost to about $78.975 from $67,500. The price of the R1S SUV will jump about 20%, bringing the new base price to about $84,000 from $70,000. All prices are before federal tax credits of $7,500.
The previous price points will apply to dual-motor versions of both the R1T and R1S, which are expected to be available starting in 2024.
The new prices originally applied to both new and existing reservations, drawing the ire of some who took to social media to complain and threaten to cancel their pre-orders.
As a result, on March 3, Rivian reversed its decision to apply the price increases to existing orders. In a note to Rivian pre-order holders, CEO R.J. Scaringe said the company had “wrongly assumed the announced Dual-Motor and Standard battery pack would provide configurations that would deliver price points similar to your original configuration.”
“While this was the logic, it was wrong and we broke your trust in Rivian,” he added. Scaringe apologized and offered not only to honor pre-orders at the original price but also help those who canceled to reinstate their pre-order at the original configuration, pricing and delivery time.
RIVN stock fell 25% in the two days after the price hikes were announced.
Scaringe said the price increases are due to rising costs of the components and materials that go into building its vehicles.
“Everything from semiconductors to sheet metal to seats has become more expensive and with this we have seen average new vehicle pricing across the U.S. rise more than 30% since 2018,” he wrote.
Also, Rivian is scrapping the 5-seat R1S electric SUV. It will only be offered in a 7-seat version.
The R1T and R1S are equipped with the Driver+ advanced driver assistance system. The Level 2 system assists drivers in a wide range of driving and parking situations.
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Road To Ramp-Up ‘Choppy’
Morgan Stanley’s Adam Jonas initiated Rivian coverage in December 2021, with an outperform rating and a price target of $147.
Jonas still believes Rivian is “‘the one’ that can challenge Tesla.” However, in a note to clients Jan. 26, 2022, Jonas said: “The road to ramping production will be choppy, but we expect largely due to supply rather than demand.”
Jonas said Rivian’s stock decline is a “reality check” of the impact of bottlenecks and other growing pains.
“The gut-check of having partner AMZN exercise its right to secure EDVs from alternative vendors (Stellantis, Daimler) has shaken investor confidence,” he wrote.
But Jonas says the stock’s recent decline is also an “excellent opportunity to gain exposure to a company, product cycle, and business model that we believe has a greater chance being a winner in this industry than most other EV competitors.”
In a recent note to clients, Jonas revealed a survey that shows 87% of investors polled favored Rivian stock over Lucid stock.
Meanwhile, JPMorgan cut its price target for Rivian to $84 from $104 on Jan. 26, 2022.
Mizuho Group’s Jordan Klein has a buy rating and a $145 price target. Klein highlights Rivian’s “first mover advantage in Commercial EV vans” and sees key benefits with its vertical integration of manufacturing, powertrain, in-house software and battery production.
Overall, most analysts initiated RIVN stock at a buy, but there were a few holds as well.
On Jan. 26, 2022, Bloomberg reported Rivian was ramping up production at its Normal, Ill., plant, after the factory had been shut down for a week earlier in the month. The report also said Rivian is now on pace to have nearly 200 delivery ready vehicles a week.
As of Dec. 15, 2021, Rivian produced 652 R1Ts and delivered 386. It also produced and delivered its first two R1S, a three-row seven-passenger SUV. Volume production of the R1S is slated for the spring.
The company said Dec. 16, 2021, that it expected to be “a few hundred vehicles short of our 2021 production target of 1,200.” On Jan. 10, Rivian reported it had sold 1,015 by the end of 2021 vehicles and delivered 920.
Rivian said it had around 71,000 preorders for its R1T pickup and R1S SUV in North America as of Dec. 15, 2021. Preorders require a $1,000 refundable deposit.
Rivian says it doesn’t expect to be profitable for the foreseeable future. The company intends to use net proceeds from the Rivian IPO for working capital, to fund growth and for other general corporate purposes.
Rivian sees a $9 trillion total addressable market. Rivals include traditional ICE and EV automakers. Downstream competitors include a patchwork of third parties such as charging providers, vehicle service providers and traditional fleet management companies, the company said.
CEO Scaringe said at a Wolfe Research conference on Feb. 24 that production ramp-up at Rivian’s Normal plant is “absolutely making progress,” but supply-chain issues are still slowing production.
Scaringe said the global semiconductor chip shortage is the “most painful” constraint in ramping up production.
Covid also hobbled Rivian’s workforce during the omicron peak. Scaringe said that for a number of weeks there had been days where up to 800 workers were out sick.
Despite all the current challenges, Scaringe says the aim is to take 10% of the EV market space by 2030.
Rivian reported a little revenue in Q3, but steep losses. Sales came in around $1 million and losses were $12.21 per share. Those results are in line with what the company said it expected in a previous SEC filing.
Rivian’s RS Rating is 7 out of a best-possible 99. Institutional investors hold around 35% of its stock. As of December 2021, 566 funds have a stake in RIVN stock.
Rivian will report Q4 and full-year 2021 results on March 10. Zacks Investment analysts expect the company to trim losses from the last quarter to $1.58 per share on sales of $50.4 million.
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Rivian Faces Fierce EV Pickup Competition
The Rivian R1T is the first electric pickup to market, but not the last.
“Several traditional automakers and EV new entrants have announced plans to launch EV pickups in the 2021 through 2024 time frame,” Goldman Sachs told clients in April 2021.
GM plans to begin deliveries of its high end EV Hummer later this year. General Motors will follow up with a Silverado EV as well as a GMC electric pickup for 2023. Ford’s first electric pickup, the F-150 Lightning, is coming in spring 2022. It has a targeted range of 300 miles vs. the Rivian’s truck’s 314-mile range per charge.
Rivian Vs. Tesla
Meanwhile, Tesla CEO Elon Musk said Cybertruck production won’t begin until “hopefully” sometime in 2023. That could reflect issues with mass producing 4680 batteries, key to making the Cybertruck and the long-delayed Semi and Roadster viable.
Tesla filed a lawsuit against Rivian and a number of former Tesla/current Rivian employees in July 2020 in California alleging trade secrets misappropriations. It recently added to that lawsuit. Rivian says it will fight the charges vigorously.
Rivian Throws Weight In Large SUVs
In the full-size EV SUV space, Tesla led the way with its Model X. But a Model X refresh has gone slowly, while sales are relatively small. The Rivian R1S will have an opportunity to make inroads. But GM is coming out with the luxury Cadillac Lyriq this spring.
In the commercial market, Rivian has a deal to make 100,000 electric delivery vans for Amazon.com. It plans to deliver the EDVs to Amazon by 2025. Rivian says it expects to deliver at least 10 vehicles in December 2021. But Rivian’s reliance on one big customer is risky.
GM and Ford have begun shipping out EV delivery vans to customers.
Rivian’s direct-to-customer model allows it to manage all sales, deliveries and service operations in-house without relying on a franchised dealership network or other third parties. So far, 22 states and the District of Columbia allow Rivian to sell directly to consumers. Those states include California, Florida, Arizona and Illinois.
But several states are challenging Rivian’s DTC model, citing dealership laws. In March, several auto dealership groups in Illinois sued both Rivian and Lucid over their DTC sales model, which they say is illegal.
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Ford Leaves Board, Scraps Joint EV Plan
Meanwhile, Ford recently vacated its seat on Rivian’s board of directors.
“Rivian is a strategic investment and we’re still exploring ways for potential collaboration with them,” Ford spokesman Ian Thibodeau said told Reuters on Oct. 13, 2021.
Additionally, on Nov. 19, 2021, Automotive News reported Ford and Rivian are scrapping plans to make an electric vehicle together. Ford originally announced its intention to make a Rivian-powered EV in 2019 when it first invested $500 million into the startup. Ford and Rivian have already canceled a vehicle they planned to make for the Lincoln luxury brand in 2020.
Is Rivian Stock A Buy?
Deliveries are getting underway, meaning Rivian will start generating revenue, with rapid growth from essentially zero seen. But heavy losses are likely to continue for some time.
Until RIVN stock has some sort of track record following the Rivian IPO, investors won’t have a clear buy point.
Bottom line: Rivian stock is not yet a buy. RIVN stock sank 11% when the deal between Amazon and Stellantis was announced on Jan. 5, 2022, and is trading well below its IPO price. Its RS Rating is just 7 out of a best-possible 99. But keep an eye on this intriguing EV startup to see if it sets up a bullish base.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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