➡️ This is a step-by-step stock review to determine if Rivian (RIVN) stock is a good buy. In this article, we’ll help you complete a 4M checklist. The 4Ms include the MOS (Margin of Safety), Meaning, Moat, and Management.
Table of Contents
➡️ Goal: It’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.
- In 2009, Robert “RJ” Scaringe founded the company under the name Mainstream Motors but later changed the name to Rivian Automotive.
- In 2011, Rivian acquired a former Mitsubishi factory in Normal, Illinois, which would become their main manufacturing facility.
- In 2017, Rivian started attracting more attention when it unveiled its first two models, the R1T electric pickup truck and the R1S electric SUV, at the LA Auto Show.
- In 2019, Rivian announced substantial investments from companies including Amazon and Ford. Amazon invested $700 million, while Ford invested $500 million.
- In 2020, Rivian faced challenges due to the COVID-19 pandemic, temporarily halting production at its manufacturing facility. However, the company resumed operations later in the year.
- In 2021, Rivian went public.
- In 2022, Ford sold 91 million shares in Rivian, leaving 11 million shares.
➡️ Goal: When you look at a stock, the first step is to look at the financials. Fortunately, Tykr does this step for us automatically. A stock is either classified On Sale (Potential Buy), Watch (Hold), or Overpriced (Potential Sell). The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make. To determine if a stock is a definitive “Buy” or “Sell”, it’s wise to complete a 4M checklist.
- Summary: On Sale
- Score: 61/100
- MOS: 85%
- Share Price: $24
- Fair Value: $71
- Revenue: $1.6B
How does Rivian make money?
➡️ Goal: It’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Rivian sells three different EV models:
1. R1T
- 0 – 60mph – 3 seconds
- Estimated range – 400 miles
- Horsepower – 600 hp
- Tow capacity – 11,000 lbs
- Seats – 5
- Estimated retail cost – $74,800
2. R1S
- 0 – 60mph – 3 seconds
- Estimated range – 390 miles
- Horsepower – 600 hp
- Tow capacity – 7,700 lbs
- Seats – 7
- Estimated retail cost – $79,800
3. Fleet (Models 500, 700, and 900)
- Estimated range – 150 miles
- Estimated retail cost – Not disclosed to the public
Rivian has also developed its own “skateboard” platform, which integrates the battery pack, electric motors, suspension, and other key components into a single chassis. This platform provides flexibility for different vehicle designs.
➡️ Goal: It’s important to understand who the competitors are and how their financials rank against this company. Try to find 5 other competitors to rank against based on Score. The best way to find competitors is to Google “XYZ competition” and replace XYZ with the company name. You can also go to Tykr and click on the “Similar Stocks” tab on each stock to see similar companies in the same industry.
Rivian (RIVN)
- Summary: On Sale
- Score: 61/100
- MOS: 85%
- Share Price: $24
- Fair Value: $71
- Revenue: $1.6B
The top 5 competitors of Rivian
Tesla (TSLA)
- Summary: On Sale
- Score: 83/100
- MOS: 55%
- Share Price: $269
- Fair Value: $372
- Revenue: $81.4B
Volkswagen (VWAPY)
- Summary: Watch
- Score: 84/100
- MOS: 0%
- Share Price: $13
- Fair Value: $18
- Revenue: $279B
Ford (F)
- Summary: Overpriced
- Score: 22/100
- MOS: 0%
- Share Price: $13
- Fair Value: $21
- Revenue: $158B
General Motors (GM)
- Summary: Watch
- Score: 67/100
- MOS: 0%
- Share Price: $39
- Fair Value: $42
- Revenue: $156B
Toyota (TM)
- Summary: On Sale
- Score: 78/100
- MOS: 51%
- Share Price: ¥160
- Fair Value: ¥252
- Revenue: ¥31.3T ($224B USD)
➡️ Goal: It’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. As investors, we should invest in CEOs with humility and integrity. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.
RJ Scaringe founded Rivian after graduating with an MS and PhD in mechanical engineering from MIT. Although both degrees are impressive, Scaringe doesn’t have any business experience operating and scaling public companies.
We like CEOs that have a proven track record of success. The reason is when times get tough, a good CEO knows how to control their emotions and help navigate a company out of treacherous waters.
Here are a few red flags I’m seeing with Scaringe:
- He owns 1.4% of Class A shares in Rivian. For context, the IPO sent the share price up to $170 and his net worth north of $2B. Since the share price has fallen to south of $20 and Rivian continued to take on more investors to keep the company alive, his net worth has dramatically fallen to approximately $110M. And keep in mind, this net worth is NOT liquid as it’s tied up in the shares of a company. It would be a mistake for him to sell shares at a significant loss, in order to send capital to his personal bank. He does NOT have the high ground in this situation.
- He owns 100% of class B shares which look like they don’t provide additional monetary value, they only provide voting power. And as Chairman of the Board, he does have 9.5% voting power. His lack of business experience along with a lot of investors and board members, I see a lot of “cooks in the kitchen” providing feedback and criticism. I imagine sleeping at night is nearly impossible.
- I found an article on golden.com that shares details about his personal life. Apparently, they quoted him saying “He gives almost 100 percent of his life to Rivian, and his family only receives around 5 percent.” If this is true, this is extremely unhealthy. This confirms the pressure from investors and the board is almost unsurmountable.
- The Glassdoor reviews confirm my assumptions to be true. A lot of people say the toxicity of the culture has increased because the majority of the discussions are focused on the share price. I’ve worked for several public companies in the past and every quarter turns into a “pressure cooker” with an emphasis on “hitting the numbers” so the EPS estimates are achieved. If we miss EPS estimates, we can expect the share price to fall.
I can only imagine the stress Scaringe is under and to be honest, there is no clear way out at this point outside of selling Rivian to a competitor. It looks like Scaringe will continue driving forward as best as he can but he’s running a marathon with a 100-meter sprinters pace. I hope burnout or health concerns don’t creep up.
Glassdoor
- Glassdoor Company Rating: 3.4
- Glassdoor CEO Approval: 68%
➡️ Goal: It’s important to highlight important company-specific news as well as industry-specific news over the last month and year. We don’t need daily news on a company to make buy or sell decisions because we’re investors, not traders. Overall, we want sufficient news to understand where a company and industry are heading over the next year or few years.
This article from investors.com states that Amazon negotiated an exclusive deal to buy 100,000 Rivian Feel Vans by 2030. Amazon owns about 20% of Rivian after investing in several funding rounds before the IPO.
This article from theverge.com states that Amazon has exclusive rights to the delivery van for four years after Rivian provided the first batch. Amazon would also have the right of first refusal for two years after that over any other companies that wanted to buy the vans from Rivian. As a result, Rivian confessed to prospective investors that a “significant portion” of its “near-term” revenue would come from Amazon. And some were listening. The exclusivity clause of this agreement may significantly hamper Rivian’s ability to capture market share.
This article from nytimes.com states that Rivian lost $1.7B in the last quarter of 2022 due to production and supply chain issues. However, Scaringe did state that they expect to produce 50,000 vehicles in 2023 which is roughly double the numbers from 2022. This may be an ambitious target to keep investors interested. This article also states that Ford initially invested in Rivian but decided not to pursue a partnership and sold most of its stock.
➡️ Goal: All of our homework on this company leads up to the 4M checklist. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the business, the competition, and the management. If all 4Ms pass, we should have high confidence in buying this stock.
✅ MOS: A score of 61/100 and MOS of 85% shows the financials are strong and the company does have upside potential.
❌ Meaning: Rivian sells a limited number of vehicle models and the price point is much higher than competitors such as Tesla and VW. This means consumer growth will be very limited. On the commercial side, the partnership with Amazon has been a lifeline to keep this company alive but the exclusive partnership does create limitations to scale the company. The exclusivity could soon be lifted but the issue is other competitors are entering the market, grabbing commercial contracts. In other words, The Rivian Van is not the only EV fleet option in the market.
❌ Moat: There are way too many competitors on both the consumer and commercial side. In order for Rivian’s share price to climb, they need to secure more commercial contracts as they did with Amazon.
❌ Management: Scaringe does not have experience building a publicly traded company. He’s also backed into a corner and under a significant amount of stress to drive the share price higher. Although the share price is up 70% over the last month, can it sustain? That is yet to be determined.
8. Is Rivian stock a good buy?
Although this stock is On Sale in Tykr, the 4Ms do not pass. I would consider Rivian a risky investment. If you are interested in this stock, I would add Rivian to your Tykr watchlist to make sure you’re notified when the Summary, Score, and MOS change. You may be able to make short-term gains based on news reports but there are too many risks for a long-term hold.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.
If you found this stock review interesting, you may also like this review on Amazon.