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Can Rivian Beat Tesla?

information technology Mar 31, 2022

You know what's crazy about Electric Vehicles?

It literally takes two years of driving an EV just to offset the carbon emissions from getting the raw materials needed for their batteries.

Yes you read that right. Two years!

It takes two whole years just to get back to even from a carbon emission standpoint relative to typical combustion based engines. 

Factor in the unstableness of these supply chains and EV production is always at risk. That is why not only is the physical product important, but being owning the supply chain from start to finish is more important than ever.

And that's one major reason why Tesla is still light years ahead of everyone else. And while we do love Tesla this is not a winner take all market -- other companies will need to emerge and compete.

And there's one player who is set up to do much better than everyone else. And that is Rivian.


Rivian Overview:

Last we covered Rivian it was during their IPO and they were a screaming short term buy for us.

They quickly sky rocketed over 70% but came crashing back to Earth in 2022 along with the rest of the tech industry.

But what we said back then still rings true today.

And that was, "Given the size of their total addressable market and the commercial opportunity with support from Amazon, the opportunity is too good to pass up on. Factor this in on top of the consumer vehicles, and the recurring revenue stream of software plus charging and this EV play is extremely differentiated and attractive. What's more is that the LONG TERM real moon shot for them will be patentable battery technology that can be applied to other verticals like utilities, consumer staples, etc."

And the long term is what we want to focus in on today. Their battery technology, differentiated supply, and early partnerships are what is going to give them a sustainable advantage over their peers.

But is it enough to beat Tesla, Lucid and others?


Rivian Battery Technology & Supply Chain:

As we mentioned above, having a vertically integrated supply chain is going to be what makes or breaks EV companies over the next several years. That means that the companies who do well will be able to buy the commodities/raw materials they need, and have a guaranteed supply of it. 

That's where Rivian shines.

Their team is adamantly focusing on their vertical integration strategy (e.g. owning the supply chain) by setting up joint ventures with battery supply companies across the globe. This gives them a much more direct line to these highly coveted raw materials.

Past that Rivian wants to eventually design and manufacture these battery cells in house -- which no other company besides Tesla can do in the immediate future.

The reason this is important is because by owning the supply chain around nickel, lithium and other precious metals, not only will supply "never be an issue" but the steady & predictable cost of them will remain projectable. 

That's why we believe Rivian will be able to control their own destiny in regards to scaling out their battery operations -- which is the key to the future of every single EV player.

And when peeling back the layers of other EV manufacturers (mostly legacy OEMs), these companies are still trying to figure out the product, let alone how to properly scale it.


Rivian Partnership:

And while battery production is the make or break for many car companies, Rivian also has another huge advantage. And that is their direct relationship with Amazon.

In case you missed it Rivian has partnered with Amazon to roll out electric vans to help them with their logistical operations. And since 2020, Rivian and Amazon have been working together to perfect this partnership through many iterations of software & hardware.

While the partnership is not yet perfected, we believe that the market is severely discounting how valuable this will be to their business going forward.

The reason we think this is so massive for Rivian (outside of the opportunities discussed above), is because if they nail this partnership, Rivian can become the largest B2B electric player out there (even bigger than Tesla).

By focusing on the massive commercial logistics business, Rivian is differentiating themselves from the many car companies who are going direct to consumer.


Rivian Stock:

So when you pair all of the above with the fact that they have an amazing product, you see a company that has massive long term potential.

And you would think that this would be reflected in their valuation, but we actually see the complete opposite. Right now Rivian is trading at only 2x EV/EBITDA and at 1/5th the multiple of Tesla. Also add in the fact that the stock is trading at .5x EV/Sales and we think Rivian is significantly undervalued given their long term prospects.

While Tesla will likely be the "big winner" in the EV space, Rivian is looking to slide in at #2, which still gives them the ability to become a trillion dollar company one day.

While this will take years to play out, we believe the "early days" of Rivian are putting them in the best position possible to give Tesla a run for their money.

Therefore our price target below is just step 1 of our long term projections.

If they keep progressing, that will be just the first stop of many on our upward revisions of price targets over the coming years.

Want to see the price target, target date and rating? 👇