As an investor, you may have come across intriguing headlines about Rivian – the electric vehicle manufacturer that‘s been dubbed the "next Tesla" by some enthusiasts.
And you likely have questions: What exactly does Rivian do? Is it a good long-term investment? How much risk is involved? And most importantly – how can I invest in Rivian stock if I want to gain exposure to this potentially disruptive player in sustainable transport?
This comprehensive guide aims to answer all those questions and more. I‘ll give you an overview of Rivian as a business, the bull and bear case for investing, a comparison to other EV stocks, and most importantly – a breakdown of everything you need to know to make an informed decision on whether owning a piece of this ambitious startup aligns with your investing strategy.
Let‘s get started.
Overview: Inside Rivian – Tesla‘s Emerging Rival in Electric Trucks/SUVs
Rivian is an American electric vehicle manufacturer founded in 2009 that focuses specifically on light-duty trucks, SUVs, and commercial delivery vans. The company is headquartered in Irvine, California and has production facilities in Normal, Illinois as well as a planned second U.S. site.
While rivals like Tesla, Lucid Motors, NIO, and Xpeng target the mass market passenger EV space, Rivian is aiming to dominate the high-end, adventure-oriented SUV and truck segments.
The Rivian lineup includes two consumer-focused models:
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R1T: Released in 2021, it‘s the first all-electric pickup truck brought to the mass market. The R1T starts at $67,500 and is optimized for off-roading capabilities.
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R1S: An electric SUV built on Rivian’s flexible skateboard platform, offers seating for up to 7 passengers with a starting price of $70,000. Scheduled to begin deliveries in 2022.
Rivian has also signed high-profile partnerships with Amazon to produce 100,000 electric delivery vans by 2030.
Other key facts about this EV manufacturer:
- Over $15 billion raised in funding from top-tier investors like Amazon, Ford Motor Company, T. Rowe Price, Cox Automotive and others
- 55,400+ reservations for the R1T and R1S consumer models implying strong early demand
- Proprietary skateboard architecture that enables rapid development of multiple form factors (trucks, SUVs, commercial vans etc)
- Strategic partnership with Amazon – Rivian vans make up part of Amazon’s sustainable Delivery Service Partners program and Amazon holds a 20% stake in Rivian
In November 2021, Rivian completed its IPO (Initial Public Offering) – offering shares to the public for the first time. It was one of the largest IPOs of the year with the company raising $11.9 billion, reaching a market cap of over $100 billion in its debut – higher than General Motors and Ford.
So in summary – Rivian has captured investor interest thanks to:
- First mover advantage and compelling brand identity in electric adventure vehicles
- Amazon commercial order provides solid initial revenue generation
- Over $15 billion in capital raised provides manufacturing scale-up runway
However, skeptics point to the risks of:
- Intense competition in EVs from legacy automakers like Ford and startup peers like Lucid Motors
- Uncertainty whether the Rivian lineup will achieve mass consumer appeal
- Production bottlenecks resulting in order delivery delays
Now that you have the lay of the land regarding what Rivian does and its competitive positioning – let‘s look at why you as an investor may want exposure to Rivian, and the different options available to you.
Why Invest in Rivian Stock?
Here‘s the bull case for Rivian as a long-term investment:
First Mover Advantage
Rivian is ahead of most competitors in electric trucks/SUVs – a green vehicle segment expected to undergo massive growth in the coming decade. They can solidify brand loyalty and build manufacturing scale before followers enter the space.
Backing of Amazon
Amazon’s multi-billion dollar order of Rivian delivery vans is a massive vote of confidence in Rivian’s technology and production capability. And Amazon will likely support Rivian securing financing if needed in the future.
Proprietary "Skateboard" Platform
Rivian’s flexible architecture means they can rapidly tweak the platform for new form factors across consumer vehicles, commercial vans, and more. This allows faster speed-to-market and greater manufacturing efficiencies.
Rivian Bulls think shares could deliver 5-10X returns or greater over the 5+ year investment horizon – if execution goes smoothly.
Let’s now review the range of options available to gain exposure to Rivian‘s upside potential as an investor.
How to Invest in Rivian Stock
For investors who have done the research and want to add Rivian exposure to their portfolio, here are four straightforward ways to invest:
1. Buy RIVN Shares Directly
- Rivian trades under the ticker RIVN on the NASDAQ
- Use an online brokerage firm account like Fidelity or Charles Schwab to directly purchase shares
- Commission-free trades available at most brokerages
Pros
- Full price upside/downside participation
- Can easily trade in and out
Cons
- No diversification – just exposed to single stock
- Requires constant monitoring
2. Invest in Relevant ETFs
Exchange-traded funds (ETFs) provide diversified exposure to sectors or themes:
Examples with Rivian allocation:
- iShares Self-Driving EV and Tech ETF (IDRV) – Rivian is 5.02% weighting
- Global X Autonomous & Electric Vehicles ETF (DRIV)- Rivian is 1.93% weighting
Pros
- Built-in diversification
- Take advantage of sector growth trends
Cons
- Modest Rivian exposure – just one of many holdings
- Still exposed to general equity/EV industry risk
3. Purchase Mutual Funds
- Professionally-managed funds like AB Sustainable Global Thematic Fund (ATEMX) invest in ESG stocks
- Managers constantly researching companies like Rivian to add/adjust holdings
Pros
- Potential for market-beating returns from expert stock picking
- Diversification across fund holdings
Cons
- Pay an expense ratio fee every year
- No control over when managers buy/sell Rivian
4. Invest via a Robo-Advisor
Platforms like Betterment and Wealthfront have socially responsible or tech-focused portfolios allocating to the EV space.
Pros
- Completely automated passive investing
- Low fees
Cons
- Asset allocations change slowly
- Limited exposure to high-growth individual stocks like Rivian
Key Metrics and Multiples for Valuing Rivian Stock
When weighing Rivian as a potential investment, savvy investors dig deeper into financial metrics to determine if shares are overvalued or underpriced relative to peers.
Here is a snapshot of how Rivian compares to other promising EV manufacturers on key valuation multiples:
| Company | Market Cap | Revenue (MRQ) | Price/Sales Ratio |
|---|---|---|---|
| Rivian | $27B | $536M | 50.56x |
| Lucid Motors | $45B | $195M | 231.79x |
| Nio | $32B | $1.6B | 2.00x |
| Ford | $60B | $39.7B | 1.51x |
| General Motors | $58B | $41.9B | 1.38x |
Data as of January 31, 2023. Source: Yahoo Finance
Based on its over 50x price-to-sales ratio, Rivian currently trades at a substantial premium to more established automakers. Investors are paying a high valuation today based on potential future cash flows.
Extreme P/S ratios above 10x are common among pre-profit, high-growth companies. Rivian would need to deliver tremendous revenue expansion in the coming years to justify its rich current stock price.
Key Risks and Downside Considerations
While the rewards of investing in Rivian at this stage could be immense if its models achieve mass adoption – risks certainly exist as well:
Production Setbacks: Ramping up auto manufacturing is complex, and delays getting vehicles delivered could dampen near-term investor sentiment.
Intense Competition: As legacy carmakers and new entrants expand their EV offerings targeting the trucks and SUV categories, Rivian faces substantial competition. Brand loyalty among pickup owners pose a barrier to gaining share.
Profitability Concerns: Like most early-stage auto manufacturers, Rivian is plowing money into scaling production ahead of achieving positive cash flow, let alone GAAP net profits. Investors must be comfortable with a long runway to profitability.
Economic Conditions: Interest rate hikes and recession fears have hit high-valuation tech and EV stocks hard in 2022. Rivian’s stock could see continued volatility correlated to the broader economy.
Each investor must weigh Rivian‘s massive growth opportunities against these meaningful risks that could severely damage the long-term investment thesis.
Should You Buy Rivian Stock? Final Thoughts for Prospective Investors
In summary – Rivian represents an extremely compelling electric vehicle manufacturer for long-term investors thanks to its specialized focus on trucks and SUVs combined with the production and operational support from strategic backers like Amazon.
If the Rivian team can successfully ramp up manufacturing capacity to meet pre-order and Amazon van demand over the next 3-5 years, Rivian has the model lineup and brand identity to emerge as a dominant player in adventure/off-road focused EVs.
However, production bottlenecks, lower than expected adoption for their vehicles, and intensifying competition in the mainstream EV space present substantial downside risks.
For investors with an appropriate tolerance for risk and a 5+ year time horizon, owning a small stake in Rivian could tremendously compound wealth over the next decade. But limit position sizing appropriately given the inherent execution risks facing such a young company.
Rivian is the quintessential high-risk, high-reward investment.
I hope this guide has broken down both the bull case and the risks to provide the knowledge needed to determine if investing in Rivian stock aligns with your personal financial objectives.
Let me know if you have any other questions!
