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Rivian(RIVN. After the quiet period of US listing, investment banks began to give different price targets, of which 67% (8/12) of the price target was bullish. Without mentioning a specific name, some of the investment bank's bullish Rivian's views are summarized below:
1. Strong demand for electric vehicles in the truck/SUV market;
2. The world's first manufacturer of luxury electric pickup trucks/SUVs, with 48,000 units booked for both models;
3. Extremely comprehensive and well-structured business strategy;
4. A full suite of direct-to-consumer services.
Views agreed upon by the market
I have to admit that all of the above bullish arguments have merit. The trucks and SUVs that the company is targeting and preparing to sell do have high demand in the U.S. These models are currently the most popular in the U.S., and it is likely that demand will not wane in the short term.
In addition, the share of light trucks in the total number of cars is increasing, and other different types of passenger cars are therefore affected to varying degrees:
SUVs are also gaining tremendous momentum in terms of popularity, with SUVs accounting for 8.8 percent of the U.S. light vehicle market by June 2021, second only to crossovers, pickups, and small cars. Meanwhile, sales of SUVs and off-road vehicles in Germany exceeded 930,000 in 2020, with the highest number of new SUVs registered.
This is Tesla (TSLA. US) has not yet released Cyberteruck, the reason why it has received so much attention. Such a huge market cannot resist the propaganda of electric vehicles for a long time.
Rivian, in turn, managed to gain the support of Musk's rival, Jeff Bezos, which will only increase market interest in the EV industry as a whole, and Rivian in particular.
The flurry of news has convinced investors that Rivian is a direct competitor to Tesla and can really compete with it.
Another factor that strongly influences investor demand is Tesla's historical rate of return. When retail/institutional investors consider whether investing in the company without revenue is the right choice, they may remember the media commentary on the company's potential market and prospects, and how they "missed out on Tesla's $100 per share."
In addition, the direct-to-consumer service that Rivian is trying to achieve is more flexible and efficient than the traditional way of selling cars through dealers.
The market does not agree with the view
Strong demand and product innovation are far from the whole reason for investors to seek growth, they must always be aware of hidden dangers and calmly assess the market situation.
It's important to note that Rivian isn't just a competitor to Tesla, it's a competitor to the entire market of electric car makers. In addition, traditional internal combustion engine manufacturers are preparing for a smooth transition from fuel vehicles to electric vehicles in the next 10-15 years.
Currently, Rivian is misvalued, and the company seems to be considered the only manufacturer of electric trucks and SUVs in the U.S. for years to come, and buyers of light trucks simply don't have much choice. In fact, this is far from the case. In the combustion engine and hybrid vehicles, Toyota (TM. US)'s RAV4 is currently the most popular SUV in the world.
Toyota motor has reported that by 2035, all new cars sold in Western Europe will be zero-emission models.
The news currently applies to Western Europe, but the enthusiasm for electric vehicles in the United States will undoubtedly lead Toyota to make a similar decision in the US market in the near future.
In addition, as Goldman Sachs analysts recently told their customers, "Several traditional automakers and new additions to electric vehicles have announced plans to launch electric pickup trucks between 2021 and 2024." "The scheduled number of Ford (F.US) F-150s reached 200,000 units, and General Motors (GM. US) is not far behind in this regard, planning to launch the Cadillac pure electric vehicle Lyriq in early 2022.
In addition, Tesla's Cyberruck, Rivian's "main competitor," is scheduled to enter mass production by the end of 2023. If so, it will certainly increase overall competition in the ev industry.
As such, Rivian's stock should be seen as a manifestation of the madness that growth investing can achieve. While not opposed to growth stocks, When Rivian went public, its valuation immediately reached $77 billion ($106.75 issue price multiplied by total outstanding shares to $725 million); In addition, what the company has done since its inception in June 2009 has:
a) Develop some prototypes
b) Access to Amazon (AMZN. US) and Ford's support
c) Get a major contract from its largest investor, Amazon.
Frankly, while the company reached a market capitalization of $150 billion just days after going public, there is little evidence to justify its premium valuation.
This is where all Rivian investors should sit back and think about it. They have now paid more than $100 billion for the company, which currently has no revenue, and the company plans to spend a lot of money to build a factory covering Europe in Bristol, England, and a factory in the United States to become a global high-performance car manufacturer. It takes years to build a factory, and a supply chain for components must be established. At the same time, Rivian can only rely on strong demand and a steady supply of pre-orders. In contrast, other large manufacturers are able to quickly optimize their production, converting fuel engines to electric vehicle engines, which will greatly weaken Rivian's competitiveness.
The company has pledged to increase the annual production of its existing plant to 200,000 vehicles by 2023, while the plant currently produces only 150,000 vehicles a year. For the two new plants mentioned above, Rivian aims to produce 1 million vehicles a year by 2030. For now, though, these are just promises.
Some analysts seem to completely ignore the difference between stocks and companies. There's no denying that Rivian may have fairly high-quality products, and its dropshipping distribution system is far superior to traditional dealerships in terms of efficiency, but investors shouldn't see the company as the sole truck and SUV producer in the electric vehicle space for the next two to three years.
conclusion
The number of cars produced cannot grow indefinitely, and there is no need for 4 times more new cars than the U.S. population. The current trend is that cars will only gradually change from fuel vehicles to electric vehicles. This means that the capital size of electric vehicle companies that have not yet established the infrastructure needed for scale will fall from the sky, and Rivian is likely to be the first.
Considering that the Fed has tightened quantitative easing and may raise interest rates, this could cost a lot of money and be difficult to raise for a company that is in the early stages of development and does not have a highly developed infrastructure and a rich operating history, which lays the groundwork for Rivian's 2022 stock performance.
The idea and advice of investment banks to buy Rivian at current levels seems out of touch with reality, as Rivian does not exist in a vacuum, but is forced to share the market with better prepared competitors.
So no matter how fast Rivian grows in the coming years, the company's stock is likely to fall sharply, because unfortunately, rivian's trucks and SUVs aren't the only ones in the electric car space for companies and car enthusiasts. Therefore, although investment banks are optimistic about the company's development and give a bullish rating, it is still not recommended to buy Rivian for now.