Everything you need to know this weekNov 08, 2021
We're bringing you all the news you need to know for this week. This report contains news on the most important IPO this week, the crypto world & earnings news. We've highlighted the most important topics in each section!
Most Important IPO This Week:
Rivian Automotive (RIVN):
These week's biggest IPO is by far Rivian. If you've never heard of Rivian they are an American EV automaker and tech company founded back in 2009. Since then Rivian has been focused on building an electric sport utility vehicle and pickup truck. Fast forward almost 12 years later and the car is ready to start hitting the shelves.
Well not literally shelves because cars on shelves wouldn't work but you get the point!
Terrible references aside the IPO setup for this EV company is looking JUICY!
At a proposed valuation of $45B (which is well below Lucid) this looks like a screaming buy for us! Given the size of their total addressable market (just a fancy way for saying their market size and opportunity) and where their current vehicles play, the commercial opportunity with support from Amazon 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.
While we fully admit that Rivian, Lucid and others are significantly overvalued in the short term in the long term today's market value pales in comparison to their potential upside. This is a decade plus play and is hard not to get excited about the vision over that time period.
Their CEO RJ Scaringe is a legitimate beast and is going to be a name you start hearing about more often.
This becomes one of our favorite IPO's of the year and is definitely a stock we're getting involved in! As we mentioned before though this is a multi-year investment that will likely experience a lot of volatility on the way up but has the potential to become a trillion dollar company one day!
Regulation talks on DeFi:
If you haven't followed the DeFi movement it is on the hottest areas in all of crypto right now.
It has often been called the wild west of crypto where there is little to no regulation and anyone has the power to loan assets and yield income.
The idea is simple, blockchain technology allows anyone to borrow digital money at competitive interest rates, with no middle men involved. Investors are often lured in by the promise of yielding higher returns that they'd ever get elsewhere.
If this sounds familiar it is because we wrote up our favorite DeFi platform here: BlockFi
But as of recently with news of hacks across the globe and obvious other fraud attempts, regulators are said to be eyeing in on this area next!
And with that regulation is clearly coming for the crypto industry. Look no further than what happened with Binance in many countries where many kicked them out because they were operating there without any authorization.
While this isn't happening tomorrow, regulation is bound to happen at this point and this will severely affect many of the young projects today!
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Most Important Companies Reporting Earnings This Week:
Plug Power (PLUG), November 8th:
Is Plug Power even cool anymore? As one of the hottest stocks earlier this year, the hype around Plug Power surely has died out since then.
But that doesn't mean that it's not a good investment anymore. We actually wrote them up earlier this summer and we were very bullish on the future of the company (see it here).
Fast forward to today and that sentiment has not changed. Plug was able to grow revenue from $72M in Q1 to $125M in Q2 - representing a 74% increase!
With such large growth last quarter, expectations will surely be high for the stock coming into their earnings call today!
While we are not putting out a prediction on revenue numbers for Q3, we are reiterating the fact that we love the stock over the long term.
The partnerships and avenues of growth for PLUG are not going away and even if this is weakness this quarter, the long term outlook still remains strong.
We're therefore using this earnings call to add to our position should there be any pullback in the stock!
We will be closely watching their management team's commentary to see if the supply chain issues have affected them at all!
Nio (NIO), November 9th:
Sense a pattern here? EV companies are just becoming more and more relevant daily. With Nio specifically though they're in a precarious position.
On one hand Nio is a real EV threat who is expanding rapidly but on the other hand they're based in China and are subject to serious restrictions by the Chinese government.
With the stock down over 20% this year, the setup for Nio doesn't look good.
However Nio has outperformed expectations over the last several quarters and we wouldn't be surprised to see another beat during their earnings call this week. The one number we're zeroing in on though is revenue growth.
Last quarter Nio only grew net revenue by ~6% which is concerning given the growth rate of their competitors like Tesla.
In either scenario, unless earnings massively outperform, we're staying away from Nio until there is more clarification from their independence relative to the Chinese government.
Investing in any Chinese stock right now is difficult until the country separates church and state further!
Sofi (SOFI), November 10th:
Last we wrote up Sofi (see our recent research on them: here), we were extremely excited about their growth prospects and business model.
Fast forward to today and it looks like the rest of the market is catching on. With the stock up 38% in the last month, the market is starting to take notice of the potential of this great fintech company.
During this earnings call however, we'll be looking for a few things:
Updates on the outlook for their student loan refinancing business line. WIth the moratorium on student loans being pushed to EOY 2021, Sofi originally lowered their forecast due to this change. We view this as a short term headwind that will be immediately alleviated as soon the moratorium ends.
Membership growth: In Q2, the member total grew by 113% YoY! We're excited to get an update on Q3 growth to see if they were able to continue piling on members. If this number outperforms, the stock will likely continue to go up!
Automated Loan Solutions: To date, half of Sofi's loans are fully automated. By doing this Sofi is able to keep margins high. If this number continues to grow, we'll see their business become more and more efficient. Therefore if revenue grows in conjunction with margins going up, investors will love this!
The key takeaway here is that Sofi continues to be one of our favorite fintech plays. But guidance for them will be extremely important and we're cautiously waiting the updates from their team.
Either way, unless guidance is terrible, we'd use any weakness post the report to add to our position!