Rivian stock (RIVN) had an explosive IPO late last year, more than doubling its price in its first week as a public company. Regrettably, Rivian stock is currently moving in the opposite direction. As of Thursday 1:20 p.m. ET, Rivian shares had lost 8.9 percent of their value, bringing the stock’s total losses since the start of this still-young year to more than 10%.
That may appear to be bad news, but it could actually be a buying opportunity for new investors.
At least one analyst believes so. “We see RIVN as a pure-play and strong early mover in the EV market, with a focus on the higher-growth SUV and light truck markets and a strong commercial vehicle roadmap beginning with Amazon,” the analyst explained.
On the one hand, Rivian is a company that currently has no profits and almost no revenue. But it’s also a company with room to expand.
At the time of publication, Rivian had 71,000 preorders for its R1T electric trucks and R1S electric SUVs, as well as orders from Amazon for 100,000 new electric delivery vans.
Mizuho believes Rivian could become a 102,000-truck-a-year company as early as next year, further enhancing its growth stock credentials. And one day, with implied annual revenue approaching $54 billion, produce as many as 600,000 trucks per year.
Rivian stock, on the other hand, already has a market valuation of more than $100 billion – without revenue – today. Even if the company does one day reach $54 billion in annual revenue, the price-to-sales ratio is two times the company’s still-hypothetical future sales.
Is that, however, a lot or a little?
In comparison, established, profitable automakers such as Ford Motor Company and General Motors have P/S ratios of 0.6 and 0.7 times sales, respectively. This means that investors now value Rivian as if it were roughly three times more valuable than automakers that have already figured out how to make a profit.
Suffice it to say that it appears overly optimistic. It appears that the investors who are selling Rivian rather than buying it are making a better bet.