Could this electric vehicle stock explode in 2022?

Rivian was one of the hottest stocks to IPO in 2021. Dylan takes a look if he thinks this electric vehicle stock can climb higher in 2022.

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Electric vehicle (EV) stocks had a pretty mixed time throughout 2021. Some soared to all-time highs, while others suffered crippling declines. One EV stock to enter the market was Rivian (NASDAQ: RIVN).

Rivian went public on November 10 with its shares priced at $78. In the seven days after its IPO, the shares skyrocketed to $172. Since then, the share price has calmed down, currently floating around the $92 mark. This still gives Rivian a whopping $83bn market cap. Does it have the potential to surpass that level in 2022? Let’s take a look.

What is Rivian?

As mentioned, Rivian is an EV manufacturer. The company currently offers two models — a pick-up truck and an SUV. These are being built on what’s known as a ‘skateboard’ platform, a type of EV base chassis that houses the majority of the vehicle’s internal components. This is mass-produced and then used as a foundation to build different models, helping save on costs.

This is one factor that gives me encouragement that the high demand for Rivian vehicles can be met in 2022. What’s more, CEO R.J Scaringe announced he believed that Rivian would have the capacity to produce 1m units by 2030. For context, those are the sort of numbers that Tesla currently produces.

At present Rivian has one manufacturing plant located in Illinois that’s equipped for maximum production of 150,000 units annually. If it can reach this sort of capacity by the tail end of this year, it would really put it on the global EV map.

However, as my fellow Fool Rupert Hargreaves pointed out, Rivian had informed the market that it would struggle to meet its initial target of 1,200 vehicles for Q4 2021. This doesn’t fill me with confidence moving into 2022.

Will Rivian stock explode?

The EV market shows no sign of slowing down over the coming years. If Rivian can position itself right, it could be in a position to take huge advantage of this.

However, more fundamentally, there are some issues I have with Rivian and its current share price. Firstly, despite its $83bn market cap, the firm is yet to make a penny. For context, Ford currently has a market cap of $80bn and delivered $127bn in revenue for FY20. This vast overvaluing worries me and makes me think we could see a big drop in the Rivian stock price during 2022.

In addition to this, Rivian has competition that is far ahead of its current capacity. Obviously, Tesla is the standout here. However, other smaller EV firms like NIO and Xpeng have substantially higher capacity and are producing revenues. Yet both are trading under the $50 mark. This again leads me to question Rivian’s current valuation.

The verdict

In my opinion, the stock seems vastly overvalued considering its fundamentals. The company’s momentum has already begun to slow, and I don’t see this changing going into 2022. Therefore, I don’t see Rivian stock exploding in 2022. I think there are much more enticing EV stocks on the market and hence, I won’t be adding Rivian to my portfolio today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Dylan Hood owns shares of NIO. The Motley Fool UK has no position in any of the shares mentioned. 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.

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