Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Can Rivian (RIVN) Make Money?

Many people are betting Rivian Automotive (RIVN) can make money from electric vehicles. For example, Rivian had an $87.19 billion market cap on 24 December 2021.

In comparison, Mr. Market gave Rivian’s closest rival and part owner Ford (NYSE: F) an $80.92 billion market cap on the same day. Strangely, Ford is already selling one electric vehicle, the Mustang Mach-E SUV, and advertising another the F-150 Lightning pickup truck.

Yet Mr. Market thinks Rivian (RIVN) has more value. For example, he paid $96.84 for Rivian stock and $20.25 for Ford stock on 22 December 2021. Yet Rivian has no consumer vehicles on the market.

Moreover, Rivian has just one auto factory in operation and another on the drawing board. In comparison, Ford has over 30 factories in operation worldwide.

What Value Does Rivian Have?

Even though it has no vehicles on the market, Rivian (NASDAQ: RIVN) has many fans.

One of Rivian’s biggest fans is Georgia Governor Brian Kemp (R-Athens). Predictably, Kemp; who faces reelection next year, is a promoter of Rivian’s plan to build a $5 billion battery and vehicle factory in Morgan and Walton Counties in rural Georgia.

Kemp, who is apparently part of Rivian’s PR department, claims the factory could create over 7,500 jobs. Moreover, The Pantagraph claims the proposed factory could build 450,000 pickups, SUVs, and delivery vans a year. They hope to complete the factory in 2024.

In addition, Rivian plans to expand its existing factory in Normal, Illinois, by 623,000 square feet. If it is successful, the expansion will bring the Normal factory to four million square feet. Rivian claims it has plans to hire another 800 to 1,000 people in Normal by the second quarter of 2022.

Thus, Rivian’s value comprises a factory, plans for another factory, and some proposals for electric vehicles. Rivian’s planned vehicles include the R1T electric pickup truck and the R1S large SUV.

They plan to sell to the R1T for $67,500 to $73,000 and the R1S for $70,000. Hence, Rivian is a luxury vehicle maker that will compete with Tata Motors’ (NYSE: TTM) Land Rover. Notably, MotorTrend estimates the R1S’s price at $74,075.

Can Rivian Mass Produce Electric Vehicles?

Interestingly, the Rivian R1T won MotorTrend’s 2022 Truck of the Year Award. Thus, Rivian can build splendid vehicles, which is reminiscent of Tesla Motors (TSLA). I think the Rivian R1T has an enormous advantage over the Tesla Cybertruck.

The R1T is a great-looking vehicle. In contrast, the Cybertruck resembles a prop from a 1970s Sci-Fi movie. MotorTrend praises the R1T for looking like a truck.  

So yes, Rivian can design excellent vehicles and build them on a small scale. However, there is no evidence Rivian can mass produce electric vehicles.

Delivery is the True Value at Rivian

However, the only vehicle Rivian has on the road is its electric delivery van. Amazon (AMZN) has ordered over 100,000 Rivian delivery vans and invested $1 billion in Rivian Automotive.

I think the delivery vans are the true value at Rivian. To explain, the market for delivery vans is enormous and growing. For example, UPS (NYSE: UPS) which has over 100,000 vans on the road, has ordered 10,000 electric vans from Arrival, Autoweek reports.

 Similarly, the US Postal Service (Post Office) or USPS claims to operate over 200,000 delivery vehicles. In addition, the USPS is planning to replace over 163.000 long-life vehicles.The long-life vehicles are the Post Office’s strange-looking custom minivans.

Finally, Statista estimates the size of FedEx Express’s vehicle fleet at 87,300 in 2021. The FedEx (FDX) fleet grew from 77,800 vehicles in 2020.

Can Rivian Grow with Amazon?

In September 2021, Amazon (NASDAQ: AMZN) had 30,000 vehicles in its delivery fleet, CNBC estimates. Amazon is buying vans to expand its logistics network by 50% in 2021. Amazon claims it was shipping 72% of its own packages in September 2021.

Amazon’s delivery needs are enormous. Amazon Logistics delivered 4.2 billion packages in 2020, Statista estimates. The Amazon Logistics package volume grew from 1.9 billion in 2019 to 750 million in 2018. Thus Rivian is working with America’s fastest growing delivery service.

Moreover, I think Rivian is in an excellent position to supply FedEx, UPS, and the USPS with electric vans. Thus, Rivian could make enormous amounts of money by selling electric delivery vans.

How Much Money can Rivian Make?

Assessing Rivian’s value is tough because the company just went public on 10 November 2021.

For example, the only data Stockrow offers for Rivian comes from 31 December 2020, almost a year ago. On that day, Rivian reported a gross profit of -$29 million and an operating loss of -$1.021 billion.

Similarly, Rivian reported an operating cash flow of -$848 million, a financing cash flow of $2.5 billion, and an ending cash flow of $3.011 billion on 31 December 2021. Thus, Rivian burns cash and borrows to survive.

Yet Rivian reported a total debt of $75 million and cash and short-term investments of $2.979 billion on 31 December 2020. Plus Rivian’s Total Assets were $4.602 billion on 31 December 2020. Hence Rivian has some value.

Rivian Vs. Tesla

However, Rivian (RIVN) is a bargain in comparison with Tesla. Mr. Market paid $1,067 for Tesla (TSLA) and $97.70 for Rivian on 21 December 2021. Yet Ford (F) was a far greater bargain at $20.25 on 24 December 2021.

Tesla makes money. It reported a quarterly operating income of $2.004 billion, a quarterly gross profit of $3.66 billion, and quarterly revenues of $13.757 billion on 30 September 2021.

Tesla is a cash-rich company. It reported $16.095 billion in cash and short-term investments and a quarterly operating cash flow of $3.147 billion on 30 September 2021. Tesla can generate enormous amounts of cash, it reported a quarterly ending cash flow of $17.723 billion on 30 September 2021.

Tesla has growing value. It had $57.834 billion in Total Assets on 30 September 2021 up from $55.146 billion on 30 June 2021 and $45.691 billion on 30 September 2020. Stockrow estimates Tesla’s revenues grew by 56.85% in the quarter ending on 30 September 2021 and 98.11% in the quarter ending on 30 June 2021.

I think Tesla’s success shows Rivian could be a viable company. However, it could take a long time for Rivian to make money. Remember, it took Tesla 20 years to make money. Thus, I think Rivian investors could have to wait a long time to make money.

Rivian vs. Ford

I think Ford (F) is still a far better stock than Rivian and Tesla. For example, Mr. Market paid $20.25 for on 24 December 2021.

Yet Ford reported quarterly revenues of $35.683 billion, a quarterly gross profit of $4.356 billion, and a quarterly operating income of $1.342 billion on 30 September 2021. Ford is capable of high revenue growth.

Stockrow estimates Ford’s revenues grew by 38.10% in the quarter ending on 30 June 2021. However, the revenue growth rate fell to 4.85% in the quarter ending on 30 September 2021.

Like Tesla, Ford is a cash-rich company. Ford reported a quarterly operating cash flow of $7.008 billion, a quarterly ending cash flow of $4.462 billion, and an impressive $46.426 billion in cash and short-term investments on 30 September 2021.

Ford has enormous value. It reported total assets of $252.677 billion and total debts of $145.873 billion on 30 September 2021. I consider Ford a value investment because Mr. Market undervalues it. Ford had a market cap of $80.92 billion and a share price of $20.25 on 24 December 2021.

Rivian is a Speculative Stock

Thus, Ford, not, Rivian is still the value in electric vehicles. In particularly, Ford offers enormous amounts of cash, cheap stock, enormous value, and a dividend.

Ford has scheduled four 10₵ dividends for 2022. Ford last paid a 10₵ dividend on 1 December 2021. Ford offered a forward dividend of 40₵ and a forward yield of 1.98% on 24 December 2021.

In the final analysis, Rivian (RIVN) is a speculative stock in electric vehicles that could offer enormous growth. However, I consider Ford (F) a better stock for ordinary investors because it offers value now. I think only people who can afford to speculate should buy Rivian.