Shares of Rivian Automotive (RIVN 2.90%) have lost nearly two-thirds of their value from their post-IPO peak as deliveries have underwhelmed and many competitors have entered the market. After hyping up the electric vehicle stock in 2021, the market seems to have turned swiftly on Rivian.
But there's still a lot to like about Rivian's place in the auto industry long-term -- it's just that the stock has gotten cheaper for investors. Here's why I think it's time to take a fresh look at Rivian's stock.
Image source: Rivian.
Rivian's value argument
When Rivian reported third-quarter earnings in December, management said the company had $5.2 billion in cash as of Sept. 30, which didn't include the $13.5 billion it raised from its initial public offering in November or the $1.2 billion it took in from floating-rate notes in October. Compare that to Rivian's $58 billion market cap at recent prices.
Rivian will likely burn billions of dollars in cash in 2022 as it ramps up production and builds out more manufacturing capacity, but the company has a huge cash balance and very little debt to worry about over the next few years.
Rivian as a growth story
The real story for Rivian is about growth -- from producing only 652 R1 vehicles from the beginning of production in September through its Dec. 15 update to a goal of 1 million vehicles per year by 2030. But the R1T truck and R1S sport utility vehicle are only part of the story. Amazon has ordered 100,000 of Rivian's Electric Delivery Vans (EDVs), and the company has goals to make the product an industry leader. A 700-cubic-foot EDV is already in testing, and a 500-cubic-foot EDV is also in development. The company is building FleetOS software, which will allow fleet owners to more effectively monitor fleet vehicles for service and efficiency.
Rivian is building its products on a scalable platform known as a "skateboard," which allows it to have common parts among its product line. From a scale and efficiency standpoint, this could be a differentiator for Rivian as it grows production to scale and expands the product line.
The right market
It's easy to argue against Rivian because it's entering an increasingly crowded EV market. But the reality is that very few companies are building fully electric trucks, SUVs, and commercial vehicles. Tesla doesn't have a direct competitor to Rivian's current products outside of the in-development Cybertruck that may not appeal to traditional truck buyers like an R1T.
Going bigger with up to seven passengers in the R1S and building commercial trucks could be a competitive advantage that lasts for years.
An intriguing stock today
Rivian is a high-risk stock today, but it's trading below its IPO price and has actually started delivering vehicles. If the company can execute on growth plans and competition remains at bay in its specific markets, this could be a great stock to own long-term.
The company has copied some of the business model innovations that led to Tesla's success, like owning its dealerships, offering mobile services, and providing integrated software. This could lead to strong margins in EVs and may eventually make this a well-operating company, which will ultimately drive the stock's price long-term.
