Why Rivian Stock Isn’t A Buy After The IPO

Rivian stock is finally going public this week, and it will trade on the Nasdaq under the ticker (RIVN). The electric vehicle (EV) startup looks to land a valuation of $65 billion when all is said and done.

The company will offer 135 million shares at $72 to $74 each, an increase over the previous price of $57 to $62. If Rivian manages to sell 135 million shares at $73, it could raise more than $9.8 billion.

When Rivian first started making headlines, it was dubbed the "Tesla Killer." Money Morning's Shah Gilani isn't convinced though. He thinks it's nothing more than a meme stock that nobody can even trade yet...

Even if the EV industry could be worth $2.49 trillion by 2027, it's worth questioning whether Rivian can dominate that industry as so many speculate.

Let's see what's in store for Rivian stock...

What Is Rivian?

Rivian is an electric vehicle manufacturer, best known for its SUVs and pickup trucks.

The company was founded by Robert Scaringe in 2009, after he graduated from MIT. Just 11 years later, the company already has more than 1,000 employees.

Rivian's most notable vehicle is the R1S. It's an SUV meant to rival Tesla Inc.'s (Nasdaq: TSLA) Model X. The company claims the R1S can drive between 240 and 410 miles on a single charge. If true, that would significantly outpace the Model X's range of 237 to 295 miles. Rivian's version starts at $70,000 before the federal tax credit.

In late 2020, Rivian sold out its first electric pickup truck, the R1T.

Amazon's Stake in Rivian

Rivian looks forward to further cashing in on the relationship with Amazon (AMZN). The online retail giant recently announced it has a 20% stake in the EV startup.

Amazon agreed to purchase 100,000 Rivian EVs back in 2019. These are likely to be the immediate revenue drivers for the company. And Amazon hopes to have 10,000 of vehicles in operation by 2022. The full delivery of 100,000 electric vans isn't expected until 2030.

Amazon's 20% stake in Rivian gives the retail giant exclusive rights to the vehicles for four years. But the EV startup announced that it will start taking new orders for its delivery vans in 2022 and will deliver to customers by 2023.

As of now, Rivian plans to deliver 20,000 vehicles in 2021. The company wants to double that figure in 2022. And while the Rivian R1T is the first electric pickup to hit the market, other automakers are not far behind it.

Companies like Ford are making the move into the EV space as well. The F-150 Lighting is coming in spring 2022 and looks to compete with Rivian's truck while appealing to more traditional consumers.

Is Rivian Profitable?

The EV startup has yet to turn a profit since it's in the early stages of production. Until the company increases production output, don't expect revenue to blow you away.

In both 2019 and 2020, Rivian had net losses of $426 million and $1 billion, respectively. And for the first half of 2021, the company had a loss of almost $1 billion. That's not a great way to start the year.

It only gets worse from there...

According to preliminary data for the third quarter of 2021, the company expects a record quarterly loss of $1.28 billion.

Rivian does acknowledge the losses. In an SEC filing, company executives went on the record stating that: "The negative gross profit relates primarily to significant labor and overhead costs... reflecting our factory's large-scale capabilities."

While that may be true, it does raise the question of when Rivian might become a profitable company.

So, what does all this mean for Rivian stock after the IPO?

Is Rivian Stock a "Buy" After the IPO?

It's tempting to buy such a hyped-up stock right after the IPO. And it's that temptation that ends up crushing retail investors like us.

You see, the large institutional investors (think big banks and billionaire hedge fund owners) get to buy in at the "IPO price."

So on the day of an IPO, you'll often hear about the stock's IPO price. But that is very different from the "opening price" that you and I can buy in at.

And Amazon already plans on buying $5 billion worth of Rivian shares. That means the stock is likely to pop at the open.

That doesn't make Rivian a worthwhile investment after the IPO. In fact, Shah thinks you should avoid buying shares of Rivian after it goes public.

"Here's the deal," Shah says. "Don't touch it."

The stock is going to explode and with good reason.

Unless you can get into Rivian stock at pre-IPO pricing, this one is a pass. Don't chase it as it moves higher.

Instead, just sit back and see what happens. Rivian is a long story in the making, and it's just getting started.

Disclaimer: Riki nema disclaimer.

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