Should you buy Rivian stock?

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Electric car manufacturer Rivian hit a market cap of $100 billion in 2021. That was peak insanity in the stock market and Rivian shares have fallen 80% since.

Today, the company has a market cap of 26.1 billion with 13.3 billion in cash remaining.

Revenue over the last 12 months is just over 1 billion and net income was -7.5 billion as the company builds out its production facilities.

Although Rivian shares are down 80% the business has performed on target.

The number of preorders for Rivians trucks has more than doubled in the first 3 quarters hitting 114,000. That’s on top of a 100,000 pre order from Amazon for Rivians electric delivery vans.

To meet those orders, Rivian has produced 15000 vehicles so far and says it can deliver 25,000 by the end of 2022.

That’s considerably better than some of Rivian’s rivals. Lucid should deliver 6-7000 this year and Fisker’s production is only just getting started.

But, Polestar should deliver 50,000 vehicles this year and Tesla is on track for more than 1.2 million. And of course there are legacy automakers like Ford, General Motors, Volkswagen etc.

As you can see from the chart, the Rivian R1 appears to be the 9th most popular electric vehicle in the US this year with just under 12,000 deliveries.

Rivian trucks are also getting good reviews, sales are coming without paid advertising and the company recently signed a partnership with Mercedes Benz.

In fact, the biggest issue for Rivian right now is keeping up with demand. Supply chain constraints continue to limit production. This is a problem because gross profits won't arrive until Rivian can ramp up volume.

And so the battle between electric vehicle makers not only comes down to which cars customers prefer but which companies can source the scarce materials needed for production, particularly batteries.

There are numerous electric vehicle companies battling it out and not all of them will survive.

If Rivian can scale to 200000 vehicle sales by 2025, with an average purchase price of 80,000 dollars that would bring in revenues of roughly 16 billion. A 3 times sales multiple gets the valuation to just under 50 billion in 3 years time which would give an investor a return around 23% per year.

But financial projections are of little use at this early stage as we don’t know how successful Rivian will be long term. In order to outperform, Rivian needs to meet demand from consumers and pull ahead of rivals. So far, it’s executing well but there’s a lot of hard work to be done.

It’s best to wait for signs that Rivian is clearly pulling ahead of rivals. Until that time I give this stock a neutral rating. But these are my personal opinions, not financial advice.

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