Not long ago, I wrote about how Rivian was the first $100 billion pre revenue company to ever go public. At the time, it was my most read post of that year. It also, almost perfectly, marked the start of the 2022-2023 bear market move downward. While today’s post is going to tell a more optimistic version compared to what I wrote back then, first, check this out to understand what I was seeing from my trenches or the S&P 500 not long after the Rivian IPO:
If you want to read the post I wrote a few years ago, please go here. The key insight is this: Sometimes, sentiment from a major story can mark a turning point at the broad market level. Back then, this was it. But now that’s why today, I have noticed that Rivian has crashed and lost some 90% of its IPO value. Wait, what!? 90%?
The car is a work of modern art.
Checking back in 2+ years later, I am wondering if it has gone too far.
The market has a way of getting overly pessimistic, negative, and downright weak minded. Trend following is the most common strategy in markets and while it works both long and short, it alone is an act of just following others and doing what the crowd does. That means, if or when it’s wrong, it has no other choice but to turn fast. I prefer people who think, build, and do things based on their individual work and ideas.
At this time, there has been a resurgence in US manufacturing. Last week we already saw one of the largest manufacturing increases within the country in ages. In addition to this, electric vehicle companies that are largely inferior are getting bid up overseas. BYD, a company based out of China, is currently being valued in the hundreds of billions! Dare I say Rivian has better tech, design, and features? Yes, I do.
Here’s the BYD chart, the Chinese EV maker, going parabolic:
Now, here’s the Rivian chart crashing:
Of course, what really surprised me was a rather simple stat about Rivian: they still have an Enterprise Value that’s currently lower than their market cap. So while they may still be churning their way to profitability, raising some funds from Volkswagon as well, they have more cash on their balance sheet than debt.
The core thing they need right now is to reduce their quarterly burn. If they can do that, everything changes.
So yes, many investors have told me their fundamentals have a long way to go, improving profitability and its operational leverage. But remember, this is no different than what they once said about every other great company as well. They’ve all been challenged at one point or another. The question should actually be this: do you think their leadership and product have the ability to turn things around? Do you think their team and product can rise to the challenge?
My answer, at this time, from my point of view, especially at these depressed levels, is YES.
I am ready and will be watching closely.
The first step is it needs to break out of this downtrend. I personally believe that this is a $20 billion company even in its current stages. BUT: always do your own research. This is just my opinion! I only write for insights and education. So, my thinking here:
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