Might Shopping for Rivian Automotive Inventory At the moment Set You Up for Life?

Rivian Automotive (NASDAQ: RIVN) attracted a stampede of bulls with its IPO on Nov. 9, 2021. The electrical automobile (EV) maker went public at $78 per share, and its inventory opened at $106.75 earlier than touching a document excessive of $172.01 only a week later.

At that peak, Rivian’s market cap hit $153 billion, which was 92 occasions greater than the income it will generate in 2022. It briefly made the tiny EV maker extra priceless than Ford or Common Motors.

Picture supply: Rivian.

Rivian’s inventory initially soared for 3 causes: It was backed by Amazon and Ford, it was already producing hundreds of EVs, and it went public on the apex of the meme stock craze. However right this moment, Rivian shares commerce for about $10, giving it a far humbler market cap of $10 billion. That is lower than 2 occasions the income it is anticipated to generate subsequent yr.

The bulls fled as Rivian’s progress slowed, it racked up steep losses, and rising rates of interest popped its bubbly valuations. Ford additionally ditched its plans to co-develop an electrical pickup with Rivian in 2021 and liquidated most of its stake within the firm in 2022. However may shopping for Rivian now whereas the market is shunning it set you up for large good points sooner or later?

Why did Rivian disappoint its buyers?

Rivian at the moment produces three fashions of auto: the R1T pickup, the R1S SUV, and a customized supply van it sells to Amazon. Earlier than its public debut, Rivian claimed it will produce 50,000 automobiles in 2022. As a substitute, it produced 24,337 automobiles, and solely delivered 20,332. It blamed these disappointing numbers on provide chain constraints, the cooling progress of the EV market, and different macro headwinds throughout the business.

In 2023, Rivian overcame these challenges to supply 57,232 EVs and ship 50,122. Its progress accelerated because it resolved its provide chain issues and ramped up manufacturing of its in-house Enduro drive unit to chop prices.

However for 2024, Rivian solely expects to supply between 47,000 and 49,000 automobiles. As soon as once more, it blamed provide chain issues — however its issues had been exacerbated by the short-term shutdown of its predominant plant in Illinois for upgrades in April, intense competitors within the EV area, and better rates of interest. It expects its full-year deliveries to land between 50,500 and 52,000 EVs.

Can Rivian lastly scale up its enterprise?

Rivian’s income soared by 167% to $4.43 billion in 2023, but it surely solely barely narrowed its web loss from $6.75 billion to $5.43 billion. For 2024, analysts anticipate its income to rise by simply 6% to $4.71 billion, however anticipate it to slim its web loss to $4.88 billion. These losses are steep, however Rivian nonetheless had $9.18 billion in whole liquidity (together with $7.87 billion in money, money equivalents, and short-term investments) on its books on the finish of June.

Volkswagen additionally launched a brand new three way partnership with Rivian in June to co-develop new EV structure and software program. As a part of the deal, the German automaker plans to speculate up to $5 billion in Rivian and the three way partnership over the following two years. That recent money ought to present Rivian the respiratory room to deliver its cheaper new R2 SUV to market in 2026, launch its higher-end R3 and R3X SUVs in 2026 and 2027, and proceed to satisfy Amazon’s large order for 100,000 electrical supply vans by way of 2030. It additionally plans to begin promoting a few of these supply vans to different clients over the following few years.

To help its enlargement plans, Rivian lately utilized for a federal mortgage, looking for funds to renew development on a brand new $5 billion plant in Georgia that would finally triple its annual manufacturing capability. That roadmap sounds promising, however Rivian nonetheless must resolve its newest provide chain bottlenecks and show that it will probably scale up its enterprise.

Sadly, Rivian insiders have bought almost 86 occasions as many shares as they purchased over the previous three months, so it would take a very long time for it to stabilize its shaky enterprise and persuade the market that it deserves a better valuation. On the intense aspect, Amazon remains to be holding its stake in Rivian and stays its high investor.

Might Rivian’s inventory set you up for all times?

Rivian’s low price-to-sales ratio may make it a tempting turnaround play for value-seeking buyers. If it will probably scale up its enterprise in the identical means Tesla did over the past decade, it could possibly be a millionaire-maker inventory from right here. Nonetheless, Tesla established an early-mover benefit within the EV area, was aided by extra beneficiant authorities subsidies, and did not face as a lot direct competitors throughout its enlargement section. It is too early to imagine Rivian may replicate Tesla’s progress trajectory.

However with Rivian shares buying and selling at these costs, the draw back threat for brand new buyers could possibly be restricted — and it could possibly be a worthwhile funding for aggressive speculative buyers on the lookout for long-term good points. Rivian actually has the potential to show a modest funding into a significant asset, however its inventory may additionally simply be reduce in half once more (or worse) if the corporate cannot meaningfully ramp up EV manufacturing.

Do you have to make investments $1,000 in Rivian Automotive proper now?

Before you purchase inventory in Rivian Automotive, take into account this:

The Motley Idiot Inventory Advisor analyst staff simply recognized what they imagine are the 10 best stocks for buyers to purchase now… and Rivian Automotive wasn’t one in all them. The ten shares that made the reduce may produce monster returns within the coming years.

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