Rivian Automotive shares are basically independent, the latest evidence, if any were needed, that the stock market is hard to figure out.
Shares of the electric-truck start-up (ticker: RIVN) fell for the fourth day in a row on Tuesday. First was the banking crisis, which hit most stocks last week. Then the market learned on Monday that Rivian could end its exclusivity pact.
(AMZN), freeing the auto maker to sell electric vans to other customers.
Even though having access to more customers affects the stock, it can be considered a positive.
According to a Bloomberg report, analyst Adam Jonas said inefficiencies at Rivian are weighing on profit margins. Morgan Stanley did not immediately respond to a request for a report from Jonas.
He rates Rivian shares at Buy and has a $28 target for the price.
Rivian closed down 3.8% at $13.21.
grew by 1.7% and 2.1%, respectively.
That’s an interesting price considering the amount of stock Rivian has issued. The company ended 2022 with about $12 billion in cash on its balance sheet, or $13.03 per share. So net cash, Rivian stock is at 19 cents.
It is a theoretical calculation. Rivian doesn’t generate positive free cash flow and it’s spending to grow its business.
(LCID) stock is trading at roughly $7 per share in net cash. that makes
, which is essentially market capitalization and debt, minus cash, of about $13 billion. Rivian is close to zero, even though Rivian is actually bigger than Lucid, selling more vehicles and generating more sales.
Rivian is expected to deliver about 50,000 vehicles in 2023, which could bring in $4.1 billion in sales. Lucid is expected to deliver approximately 12,000 vehicles for a total of $1.3 billion.
The difference in valuations between the two EV start-ups is difficult to explain. “That’s a good question,” said Battle Road Research analyst Ben Rose when asked to explain.
He offered a few possible reasons, but said none were convincing.
First, while the market may have more confidence in Lucid’s market position, Rose is skeptical about whether Lucid can achieve the production forecast for 2023. What’s more, he said, demand for trucks, Rivian’s focus, is larger than for the high-end luxury sedans Lucid makes.
Second, says Rose, the Saudi investment fund, which owns the majority of Lucid, could salvage the business if it runs into trouble. But any injection of cash would require the company to issue stock on the exchange, diluting the value of shareholders’ existing holdings.
Rivian shares rose on hold. He doesn’t have a target for the price.
Investors can’t access Rivian’s cash, but the situation is still odd. How this will work is anyone’s guess.
Write to Al Root at [email protected]