If You would Invested $3,000 in Rivian Automotive in 2021, This Is How Much You Would Have Today

Rivian Automotive (RIVN -7.08%) was a single of the best IPOs of 2021. The maker of electric powered trucks, SUVs, and vans went community at $78 a share in November 2021, and it created a great deal of excitement simply because its leading investors were Amazon (AMZN -2.06%) and Ford Motor Firm (F -1.63%). Rivian had also commenced mass-developing its electric powered autos (EVs) ahead of its IPO, which manufactured it appear a lot more trusted than other pre-generation EV makers that went general public by merging with exclusive reason acquisition providers (SPACs).

Rivian’s stock opened at $106.75 on the to start with day and skyrocketed to an all-time high of $172.01 just a 7 days later on. But right now it trades at about $20 a share. A $3,000 financial commitment in its IPO would have blossomed to more than $6,600 prior to withering to less than $800 these days. Let’s see why Rivian’s stock initially soared, why it plummeted, and exactly where it could possibly be headed in a 12 months.

Graphic source: Rivian.

Why the bulls initially loved Rivian

Rivian manufactures 3 sorts of EVs: the R1T pickup truck, the R1S SUV, and Amazon’s electric powered shipping van (EDV). Its R1 vehicles start off at about $70,000 and can journey more than 300 miles on a solitary charge.

Amazon experienced also placed an buy of 100,000 EDVs in 2019, whilst Ford’s Lincoln division had been acquiring a new EV with Rivian prior to the pandemic. Rivian initially explained to investors that it could deliver 50,000 vehicles in 2022, and it expected to satisfy Amazon’s total order by 2025. Its complete amount of preorders for R1 autos (excluding Amazon’s first EDV order) also surged from 71,000 in the 3rd quarter of 2021 to over 114,000 in the third quarter of 2022.

Why the bears ultimately chased absent the bulls

But soon after Rivian’s general public debut, the cracks commenced to surface. Very first and foremost, the market’s untempered enthusiasm for Rivian boosted its current market cap to $153 billion — 85 situations the product sales it can be anticipated to deliver this 12 months — and produced it extra precious than Ford and Common Motors.

Rivian was far more than priced for perfection at that nosebleed valuation, so it couldn’t afford to make any mistakes. But soon right after its IPO, Ford abandoned its designs to co-create new Lincoln EVs with Rivian, which had already been suspended considering the fact that the start out of the pandemic. This January, Amazon agreed to begin shopping for Stellantis‘ Ram ProMaster electric vans in 2023. Amazon also postponed its target for getting the entire fleet of 100,000 Rivian EDVs from 2025 to 2030. Traders widely interpreted all individuals choices as a loss of self confidence in Rivian’s generation abilities.

All those fears ended up verified this March when supply chain constraints pressured Rivian to lessen its annual production target to 25,000 autos. In May possibly, Ford lowered its stake in Rivian from 12% to significantly less than 10%, while Amazon maintained its 20% stake and remained the automaker’s leading investor.

Rivian has produced 14,317 cars in the 1st 3 quarters of 2022, so it will need to have to generate above 10,000 autos in the fourth quarter to accomplish its entire-calendar year target of 25,000 autos. Rivian believes it can reach that lofty objective, but a recent remember (of virtually all the motor vehicles it manufactured this yr), allegations of basic safety violations, and the suspension of its EV joint enterprise with Mercedes-Benz to develop electric powered vans in Europe all raised fresh new issues about its generation capabilities.

Growing desire charges concluded off the stock (for now)

Rivian’s stock could have had a softer landing if fascination prices had been minimal and investors however experienced a nutritious appetite for speculative EV shares. Unfortunately, soaring curiosity premiums above the earlier yr drove investors toward far more conservative investments and punished unprofitable organizations like Rivian, which racked up a staggering web loss of $5.03 billion in the initially nine months of 2022 while only building $995 million in profits.

To make issues worse, Rivian’s stock nonetheless would not seem inexpensive immediately after its precipitous decline. It is nevertheless valued at about $17 billion, or 10 moments the sales it can be anticipated to produce this yr (if it truly provides 25,000 automobiles). By comparison, Tesla trades at 5 situations this year’s profits.

I individually feel Rivian is far more promising than a lot of of the SPAC-backed EV makers that flopped over the earlier yr. But till it correctly ramps up its creation and curiosity costs stabilize, it will keep on being out of favor in this challenging bear industry.

John Mackey, CEO of Total Foods Current market, an Amazon subsidiary, is a member of The Motley Fool’s board of administrators. Leo Sunshine has positions in Amazon.com. The Motley Idiot has positions in and endorses Amazon.com and Tesla. The Motley Fool has a disclosure coverage.

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