Rivian Automotive Inc: Is This EV Startup Worth $127 Billion?

Why Is RIVN Stock Higher-Priced Than GM Stock & F Stock?

The electric vehicle space will be one of the most significant economic growth areas over the next few decades as the world moves towards carbon neutrality. But sometimes the euphoria by investors can get way out of hand.

Take the case of Rivian Automotive Inc (NASDAQ:RIVN), which debuted on the stock market on November 10 and already has a market valuation exceeding many of the top automakers.

I could be totally wrong in my current assessment of Rivian stock, but given the available information, it seems excessively priced for the average investor. RIVN stock seems more suited for momentum traders who are willing to take a risk.

Let me explain.

As I write this, Rivian stock is trading at $159.03 per share and the company has a staggering market cap of $127.4 billion.

Some would argue that Rivian Automotive Inc’s market valuation isn’t excessive compared to Tesla Inc‘s (NASDAQ:TSLA) market cap of more than $1.0 trillion. But to say that Rivian deserves a market valuation that makes it one of the top five automakers in the world based on market cap makes no sense to me.

Again, I could be wrong about Rivian Automotive Inc, but considering that the company had no revenues in 2020 and is only beginning to sell its electric vehicles, one has to wonder what the market is thinking.

Rivian lost more than $1.0 billion in 2020, and I doubt it will be profitable for years.

Supporters of RIVN stock will argue that financial growth is coming. That’s fair, but with about 55,000 electric vehicle pre-orders on its books, the company’s $127.4-billion market cap seems far-fetched at this point. (Source: “Investor Relations,” Rivian Automotive Inc, last accessed November 16, 2021.)

Amazon.com, Inc. (NASDAQ:AMZN), a financial backer of Rivian, has initially ordered 100,000 electric vehicles from the company. This is positive, but it will take time for those vehicles to come off the assembly line.

In comparison, Tesla, which has also been the subject of valuation concerns, produced more than 500,000 electric vehicles in 2020 and is expected to ramp up those numbers as production at its Shanghai plant accelerates.

Moreover, major automakers including Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) have been aggressively shifting to electrify their vehicles.

Ford, another financial backer of Rivian Automotive Inc, posted revenues of $127.1 billion in 2020, but its market cap of $79.0 billion is much smaller than that of Rivian. General Motors sold more than five million vehicles in 2020, including many electric vehicles, but its market cap of $91.0 billion also trails that of Rivian.

 CompanyMarket Cap2020 Revenues
Tesla$1.0 Trillion$31.5 Billion
Rivian$127.4 Billion$0
General Motors$91.0 Billion$122.5 Billion
Ford$79.0 Billion$127.1 Billion

(Source: Yahoo! Finance, last accessed November 16, 2021.)

Analyst Take

While I congratulate the early success of Rivian Automotive Inc, I believe the market is overvaluing Rivian stock.

Of course, I could eventually be proven wrong, but the current data doesn’t support Rivian’s valuation. For the average investor, it would probably be better to stick with Tesla, General Motors, or Ford.