The stock of electric vehicle start-up Rivian Automotive (RIVN 6.72%) peaked at more than $160 per share shortly after it went public in November 2021. It has now dropped to well below its $78 IPO price at its recent price of under $60 per share.
The declining price helped entice several well-known billionaire investors to become shareholders. Fund managers George Soros, Dan Loeb, and Philippe Laffont all disclosed holdings in Rivian in recent Form 13F filings. With the stock down nearly 45% year to date, including a decline today, retail investors may be wondering if Rivian stock should be part of their portfolios.
Image source: Rivian Automotive.
Today's drop came on news that the company's recently announced $5 billion manufacturing expansion project is facing opposition from local residents in Georgia. The state is now taking control from local officials to be able to bypass local zoning laws and push the project through. But Rivian will still need to forge a relationship with the local community for the project to be successful in the long run.
The plant will have the capacity to produce 400,000 vehicles per year when it is complete. Production is currently scheduled to begin in 2024. The drop in Rivian stock this year comes as reality is beginning to set in for investors. The company has only just begun production, making about 1,000 EVs in 2021. But the drop in the share price still only brings the start-up's market cap down to $50 billion. There remains much success already built in to that valuation.
Investors clearly see much potential in the company, however, as reflected in the several Wall Street whales becoming shareholders. That is because the company is focusing on three distinct EV market niches. The markets for electric pickup trucks, SUVs, and commercial delivery vans could each be huge. And they are not where market leader Tesla and other EV makers are mainly focused.
The commercial delivery vans will largely be going to Amazon, which has ordered up to 100,000 that it plans to have operating by 2030. Investors also know that Amazon has a financial stake in Rivian, so it is more than just a customer-supplier relationship.
Buying the stock now requires a high risk tolerance, and a realistic expectation of how long it will take to play out to be successful. The ramp-up in manufacturing and other aspects of the business aren't likely to go flawlessly, as witnessed in the example of the Georgia facility. But the market is expected to be huge, and Rivian's product has already won praise with it being named the MotorTrend 2022 Truck of the Year. It's easy to see the stock being volatile and dropping further. But now could still be a good time to begin phasing into an investment with the proper allocation and expectations.
