Rivian Automotive, Inc. RIVN stock observed an over 8% decline intraday on Friday, on top of a staggering 25.60% drop from the previous session due to disappointing 2024 production guidance.
Tesla enthusiasts received a pleasant surprise from the renowned investor, Future Fund co-founder, and Managing Partner Gary Black, who passionately vouched for Rivian as a potential contender for the second spot in the electric vehicle arena, trailing only the iconic Elon Musk-led company.
Promising Qualities: Black rallied Tesla investors behind a robust non-ICE player to drive the global shift towards sustainable energy. He highlighted Rivian’s superior product quality, brand recognition, operational excellence, freedom from legacy internal combustion engine baggage, and competitive edge.
Embracing cooperation over rivalry, Black envisioned Rivian thriving alongside Tesla as a formidable runner-up in the market hierarchy by 2030. Drawing from a Consumer Reports survey, he lauded Rivian for attaining top customer satisfaction marks, with a remarkable 86% expressing willingness for repurchase.
Furthermore, Black emphasized that Rivian’s core business spans pickups and SUVs, the most lucrative sectors in the automotive space, where industry giants like General Motors Corp, Ford Motor Co., Volkswagen AG, and BYD Co. Ltd. fall short of posing a credible threat.
Financial Strength: Anticipating a positive gross margin by the fourth quarter, Black foresees a significant reduction in Rivian’s cash burn heading into 2024. Brushing aside concerns regarding capital sufficiency, he highlighted Rivian’s consistent success in fundraising and disclosed a substantial cash and marketable securities holding of $9.4 billion at the end of the fourth quarter.
Merger & Acquisition Prospects: Black hinted at the compelling possibility of Rivian’s prime customer for electric delivery vans, Amazon, Inc., acquiring Rivian. Even with a 50% premium, Black deemed it a trivial expense for Amazon given Rivian’s estimated enterprise value below $10 billion, compared to Amazon’s colossal $1.8 trillion market cap. The e-commerce titan’s $87 billion hoard in cash and short-term investments as of end-2023 adds weight to the argument.
Upcoming Catalyst: Comparing valuations, Black pointed out Rivian’s relative undervaluation at 1.5 times anticipated 2023 revenue in contrast to Tesla’s 6.2 times multiple. He underlined the significance of Rivian’s R2 platform launch event scheduled for March 7, positioning it to capture the $45,000 to $50,000 price bracket.
Black also echoed industry calls for Tesla to hasten the rollout of the Model 2 next-gen platform EVs, projected to hit the market below the $30,000 mark.
Future Fund Active ETF FFND, managed by Black’s firm, holds 3,700 Tesla shares valued at $730,417 and 20,852 Rivian shares valued at $238,755.
At the latest update, Rivian shares were down by 7.9% at $10.54, sourced from Benzinga Pro data.