Rivian Automotive Stock Forecast: Good Bet in the EV Space

Mohit Oberoi, CFA - Author

Nov. 2 2021, Published 9:34 a.m. ET

EV (electric vehicle) startup Rivian Automotive, which is backed by Ford and Amazon, has filed for an IPO. Rivian is the second major EV startup looking to go public in 2021 after Lucid Motors, which went public through a SPAC reverse merger. What’s the forecast for Rivian stock and should you buy the IPO?

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Rivian’s IPO is coming at a time when there has been a renewed optimism towards EV stocks with Tesla rising to an all-time high. Other EV names have also piggybacked Tesla and moved to higher price levels. Lucid Motors stock surged as the company started the deliveries of its cars, according to the schedule. However, Lucid Motors stock is still way below its pre-merger highs.

Rivian IPO date and price

Rivian hasn’t specified the IPO date but could list soon in a bid to capitalize on the momentum in EV stocks. The company has kept the IPO price range between $57 and $62. It would issue 135 million shares as part of the IPO prices, while the underwriters have an option to purchase an additional 20.25 million shares.

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If underwriters fully utilize the oversubscription offer, Rivian could end up raising almost $9.6 billion. Rivian intends to use the funds to grow its business. Barring Tesla, which has turned profitable on a sustainable basis, other EV names are posting losses and burning cash.

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Over the last year, EV companies including Tesla went on a share selling spree to raise cash by capitalizing on the spike in their stock price.

Rivian's IPO valuation

Rivian would trade under the ticker symbol “RIVN.” Amazon holds a 20 percent stake in the company, while Ford holds around 5 percent. Amazon has also placed a massive order with Rivian. The demand isn't really a concern for EV companies and most of them have constrained capacity.

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The IPO would value Rivian at an initial market cap of around $55 billion and almost $60 billion on a fully diluted basis. The company has raised around $10.5 billion so far and according to a report from The Wall Street Journal, it was last valued at $27.6 billion in January.

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The company is seeking twice the valuation of its most recent private market funding round. Given the euphoria towards EV stocks and the lack of quality EV names in an otherwise crowded market, Rivian’s IPO might sail through.

For example, Lucid Motors’ market cap has surged to $60 billion as markets gave a thumbs up to its execution plans. While a lot of EV companies have faltered on execution, which sent their stocks crashing, Lucid kept the delivery timeline.

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Should you buy Rivian IPO?

Rivian is currently taking pre-orders for the R1S SUV and R1T pickup. The company has already taken the lead in the pickup market and the R1T is in production. The model would compete with Ford’s F-150 Lightning, whose ICE (internal combustion engine) avatar has been North America’s best-selling pick-up for decades.

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There's also Tesla’s Cybertruck whose production timeline has been extended to the end of 2022 amid global supply chain issues. The starting price for R1T is $67,500 before federal tax credits, which is above the $40,000 starting price for Ford F-150 Lightning.

The R1T is pitched as a luxury pickup model. The company expects to deliver the R1T model with a range of over 400 miles by January 2022, which would give it the first-mover advantage.

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While Lordstown Motors was looking to get the first-mover advantage with its Endurance pickup, the company lost the lead amid production bottlenecks. The company also announced the sale of its Lordstown plan to Foxconn, which will produce the vehicles on a contract basis.

Currently, Rivian’s valuations don't appear high compared to other startup EV companies. The backing from Amazon and the massive order book would also help the company in the medium term. Rivian’s IPO looks like a good buy considering the current momentum in EV names.


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