Already this year, the Rivian (NASDAQ: RIVN) share price is down 44%. And since its peak at close to $180 back in November, the stock has crashed 68%. Ouch!
It’s been quite a ride for investors, then, since the company listed via an initial public offering (IPO) back in November. In fact, at the time of the IPO, Rivian was valued at $66.5bn, which then rose to $153.3bn in the space of seven days. However, today, the market value has fallen to $52.5bn. To put that into perspective, the loss in Rivian’s market value since November is greater than all but nine of the biggest companies in the FTSE 100.
Which brings me to the question: should I buy the stock now that the share price is far lower? Let’s take a look.
The investment case
Rivian operates in the expanding electric vehicle (EV) industry. Specifically, it designs and manufactures electric vans and pick-up trucks in the US. The growth in this market alone should provide a huge tailwind for Rivian in the years ahead. Indeed, the North American EV market is expected to grow at a compound annual growth rate of 37.2% from 2021 to 2028.
There are some big-name investors backing the company too. For example, Amazon owns over 17% of Rivian shares. Furthermore, Amazon has a contract with Rivian to deliver 100,000 EV vans over the next few years as it looks to electrify its delivery fleet. This is a huge boost of confidence and shows excellent early traction for Rivian’s EVs.
Looking further ahead, and the commercial van segment could be an excellent growth market for it. This targets an area that popular EV maker Tesla doesn’t right now. The shift to online shopping and the need for commercial delivery vans could further boost Rivian’s sales as more e-commerce retailers look to electrify their fleets.
Such sector tailwinds can be seen in Rivian’s revenue forecasts for the years ahead. It’s expected to grow to $3.5bn in 2022, and increase to $8.5bn in 2023. If achieved, this would be a highly impressive growth rate of 145%.
Should I buy at this Rivian share price?
However, I think the volatility in the share price highlights the uncertainties for the company at present, and therefore the risks for me as a potential investor.
One of these uncertainties is the potential for competition. Its flagship pick-up truck, the R1T, is a direct competitor to established brands such as Ford and GM. In particular, Ford is planning to double production of its F-150 Lightning truck due to soaring demand. These large automakers are investing heavily in their pivots to EV models, and have the expertise and capacity to boost manufacturing output to meet rising demand. Rivian is much further behind in its manufacturing capabilities, so it may lose market share as it ramps up its own production.
The valuation is still high too, in my view. On a forward price-to-sales (P/S) ratio, Rivian shares trade on a multiple of 13. This does depend on it achieving its revenue forecast of $3.5bn in 2022, which is a big ask considering revenue was only $61m last year. By comparison, Ford trades on a P/S of 0.5.
So for now, I won’t be buying the shares. I see too many uncertainties ahead, which could mean further falls in the share price.
