Yesterday, electric vehicle (EV) manufacturer Rivian Automotive (NYSE: RIVN) went public via an Initial Public Offering (IPO). It raised nearly $12bn, putting it among the top 10 US IPOs of all time.
Some investors have compared Rivian to Tesla, which has seen huge share price gains in recent years and recently achieved a $1trn valuation. With that in mind, should I buy RIVN stock for my investment portfolio?
Rivian: the next Tesla?
Before we look at the investment case, let’s take a quick look at the business. Rivian is an American EV manufacturer that specialises in ‘adventure vehicles’ such as pick-up trucks and vans.
Its flagship vehicle is the R1T, which it describes as a ‘truck built for whatever you call a road’. This is a powerful EV that can tow up to 11,000lbs and go from 0-60mph in just three seconds. This model – which is set to compete with Tesla’s Model X, as well as electric SUVs from other manufacturers – entered production in September and is set to be available in January 2022.
Rivian priced its IPO shares at $78 a piece, giving the company a market capitalisation of nearly $70bn. However, the share price spiked up yesterday and ended the day at $101. This means the market-cap is now much higher.
Rivian: the bull case
There are certainly things to like about Rivian from an investment perspective, in my view. For starters, the company operates in a high-growth market. According to the International Energy Agency, the number of EVs globally is set to hit 145m by 2030, up from just 11m in 2020. The growth of the EV industry, which is being driven by the increasing focus on climate change and sustainability, should provide big tailwinds for Rivian.
Secondly, the company – which was founded in 2009 – has been backed by some big names, including Ford and Amazon. This suggests to me it has a very good product. It’s worth noting that Amazon – which is the company’s largest investor – has said that it will purchase 100,000 Rivian vans for its delivery services by 2024.
The bear case
I do have some reservations about investing in Rivian shares however. One is the company’s valuation. After yesterday’s share price jump, the market-cap is now around $90bn which seems very high, given that the company is yet to generate any meaningful revenues. To put its valuation in perspective, Ford has a market-cap of $77bn. However, it sold 4.2m cars last year.
Another concern is competition. Not only is the R1T up against Tesla’s Model X, but it is also up against Ford’s new F-150 Lighting electric truck, which has already received 160,000 pre-orders. It’s worth noting that Ford’s traditional F-150 has been the best selling truck in the US for over 40 years.
Finally, because Rivian is focusing on a niche area of the market, its offer may not be universally popular. It could sell a lot of EVs in the US, where pick-up trucks are very common, however it may struggle in Europe, where space is at a premium and smaller cars are more popular.
Should I buy Rivian stock now?
Weighing everything up, I’m happy to keep Rivian on my watchlist for now. All things considered, I think there are better growth stocks I could buy today.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares of Amazon. The Motley Fool UK has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.