Onetime Wall Street darling Rivian (RIVN -1.99%) has fallen out of favor with a great many investors.
This is not entirely the electric vehicle (EV) maker's fault. For a variety of reasons, manufacturers generally and EV makers specifically are suffering, and investors are punishing their stocks. Rivian is one of the EV companies that has been most affected by this.
It may be hard to imagine now, but Rivian was a hot item when it went public in November. The IPO price was $78 per share, and thanks to robust demand, it zoomed to nearly $107 when the stock opened for trading on the Nasdaq.
A $10,000 investment that morning would have scored an investor almost 94 shares. Today, those shares are worth just $2,824, for a vertigo-inducing plunge of 72%.
As mentioned, we can't lay this entirely at the feet of poor Rivian. With economic worries mounting, many investors are ditching the stocks of what they consider to be riskier businesses in favor of ones assumed to be more recession-resistant. And in the EV industry specifically, shortages of crucial components such as computer chips and tight supplies of commodities like lithium (a key raw material in EV batteries) are having a deleterious effect on production and deliveries.
These issues are tough on all EV makers -- just ask the undoubtedly worried managers at Tesla (TSLA -1.74%) and Nio (NIO -0.17%). However, they are especially challenging for the smaller Rivian, which in contrast to those two relative veterans, only started rolling vehicles out of its factory in December.
As such, it's already absorbing losses as an early-stage manufacturer with limited deliveries. And those deliveries are notably lower than originally anticipated. In March, management announced that due to the challenges mentioned above, Rivian would deliver only around 25,000 vehicles in 2022. That's well below the previously anticipated 40,000.
So it's really no surprise that Rivian's stock has performed so poorly. Neither Tesla nor Nio has had it easy, but those two EV industry bellwethers have been more resilient. Tesla's stock price has declined "only" 31% since Rivian's first day of trading, while Nio has shed 49% of its value.
Delivering a brighter future?
To cope with its challenges, this month, Rivian management revealed to employees that it would launch a cost-cutting program. Details have been scant so far, as the initiative hasn't yet been made public, but according to Bloomberg (which cited sources "familiar with the matter"), management could lay off up to 5% of the company's 14,000-strong workforce.
Yet I think this isn't a bad time at all to invest in Rivian. The company has a lot going for it, even though it's coming of age at a tough and nervous moment for the vehicle industry and its lively EV segment.
The company has three models with fine sales potential -- the R1T pickup, the R1S SUV, and the specialized delivery vehicle it's making for Amazon (NASDAQ: AMZN). Yes, only deliveries of the R1T have been made so far. Still, the R1S should be a popular option for SUV aficionados who don't want to shell out a minimum of nearly $100,000 for a Tesla Model X. (The R1S's current starting price is just over $72,000.)
And, of course, there's the current jewel in Rivian's crown, the Amazon contract.
The company hasn't yet begun to deliver vans to Amazon, alas, but both the e-commerce giant and Rivian are thinking long-term anyway. Amazon's order is for a whopping 100,000 of these EVs by 2030, and while it would surely love to get its mitts on some of them ASAP to help cut its fuel costs, it can wait for the benefits Rivian's vehicles will bring. I don't think there's much risk that Amazon will pull out of the arrangement.
No auto manufacturer will recover suddenly and spectacularly from their industry's current issues. As a relatively early-stage player in this game, Rivian might take longer to bounce back than its peers. But thanks to that monster IPO, it's sitting on a big pile of cash ($18 billion, as of the end of March), and it should be able to ride out the bad times. And the good times feel like they're not too far down the road.