EV maker Rivian Automotive, Inc. (NASDAQ:RIVN) debuted on Wall Street with a bang. The shares raced to a strong finish, closing the week at $129.95, up about 66.6% from the IPO price of $78. The spike in shares is due to a combination of scarcity value meeting theme investing, according to Loup Funds Managing Partner Gene Munster.
FOMO Fueling Rivian Rally: Rivian went public with a $60 billion valuation and has seen its value more than double to $125 billion within two days, Munster noted. The spike, according to the company, is due to a combination of two things.
Firstly, Rivian’s partners, which include Amazon, Inc. (NASDAQ:AMZN) and Ford Motor Company, check a quality box for institutional investors, the analyst said. Secondly is the rise of theme investing, of which EVs are especially intoxicating to investors given the rise of Tesla, Inc. (NASDAQ:TSLA) and to a lesser extent, Lucid Group, Inc. (NASDAQ:LCID), he added.
“Putting it together, it’s the fear of missing out that has further fueled the rise in RIVN shares,” Munster said.
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Valuation Doesn’t Instill Confidence: There’s less visibility into the models Rivian will be selling over the next five years, Munster said. By comparison, Tesla has given investors a clearer five-year vehicle roadmap with the addition of the Cybertruck, along with the likely Model 2, the analyst said.
Rivian currently has three models – the R1T pickup truck, the R1S SUV, and the Amazon Prime delivery truck – the analyst noted. The list price of the R1T and R1S is $70,000, which means the average selling price will be around $80,000, he added.
This is below Tesla’s S&X average selling price of around $95,000, Munster said. Tesla will sell about 70,000 vehicles per year of these high-end models, he added.
Since Rivian’s two consumer models are less expensive than Model S&X, demand should be higher, and therefore the company is likely to deliver 100,000 vehicles for 2023, Munster said. The analyst estimates total deliveries of 150,000 units, adding fleet deliveries of 50,000, compared to 2 million cars Tesla expects to sell in 2023, the analyst said.
Excluding cash, investors are valuing Rivian at about $750,000 per 2023 delivery, compared to Tesla’s valuation of $500,000 per 2023 delivery, Minster said.
“It will take a couple of years for the Rivian production ramp to be validated, which should be a reminder to RIVN investors that patience is a virtue,” Munster concluded.
Rivian closed Friday’s session up 5.66% at $129.95.
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Photo: Courtesy of rivian.com