Should you buy Rivian Stock [$RIVN]

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everyone me kevin here let's talk about

origin should you buy rivian stock well

first things first this video is being

made right before the ipo however the

information within this video will still

be relevant after the ipo so some of the

stuff will be dated regarding the ipo

because we'll know what'll have happened

because we're going to include a little

bit of my expectations as to what might

happen at ipo but we're also going to

talk fundamentals on this company and

whether or not you should get into

rivien so with that said let's get right

into it rivian so far has sold very few

vehicles yet its market cap is likely to

exceed that of a honda and this is

raising a lot of eyebrows why is this

company getting so much attention why

does everybody keep asking about rivian

well they have three particular vehicles

one

is known as the r1t this is a toyota

tacoma style pickup truck these are

electric vehicles bevs battery electric

vehicles and there's a lot of enthusiasm

for rivien particularly because this

company is backed by both amazon and

ford which you think wait a minute

ford's backing them and they have an

electric pickup truck coming out as well

yep but rivien also has the r1s which is

an electric all-electric suv and you get

the triple threat which is kind of like

investing in like a fiskar

and on arrival together because you get

the triple threat of also getting into

the commercial field of development so

you get the pickup truck vertical you

get the suv vertical and you get the

vertical of

these

electric delivery vehicles or edvs and

obviously slapping the prime logo on the

side thanks to that prime partnership is

a really sexy way to get lots of money

for your stock and by going public with

135 million shares that they're offering

to the public the company is expected to

raise over 11 billion dollars which

since they only had cash burn of about

1.6 billion dollars in the first half of

2021. 11 billion is going to go a long

way to help this company develop their

manufacturing and finally scale they've

got a large plant in normal illinois and

folks they are ready to produce they

just need some more cashola

and now we're going public at a time

when evs are pretty hot in the

conversation again especially since

tesla just skyrocketed from the seven

and eight hundreds up to a high of

twelve hundred fifty dollars until of

course elon musk had to come out and

dump uh ten percent of his shares four

reasons we don't need to go into in this

video leading the stock to go right back

to a thousand dollars but still the

point is lucid has essentially doubled

in the last few months and electric

vehicles are all the rage right now so

rivian's definitely chosen a hot hypey

time to go public

but let's talk a little bit because this

company barely delivers vehicles

honda sells five million vehicles per

year and rivien doesn't so what makes

rivian special well first with its

vehicles rivien is trying to do pretty

much everything that tesla is doing

they're trying to do as well so first

let's talk about autonomy a little bit

the cars are expected to launch with

level two driver assist features this is

going to be like your honda or toyota

where you have things like steering and

braking anytime you just have one thing

like cruise control that'd be level one

autonomy if you have cruise control and

steering and braking assistance or just

two things from the pack you're at level

two if you have level three this is

where you can really take your hands off

the wheel and let the car drive and you

occasionally have to take over right the

cars are going to be equipped the r1

vehicles are going to be equipped with

11 cameras 12 oil ultrasonic sensors 5

radars and high precision gps antenna

which th these are important for future

potential level 3 autonomy which they do

expect in the future to get to level

three autonomy but obviously we're

nowhere near that place right now we

would expect the company would be able

to depolar tesla and try to use this

sort of self-driving assisted data

and help build out their self-driving

platform to actually get to level three

though

taking a look at tesla's full

self-driving beta there's a long road

ahead and uh who knows how how we'll end

up getting there hey but rivian might

even in the future just license the

self-driving autonomy from tesla and

then have the sensors ready to go uh

sensors and cameras uh lidar not being

as uh as exciting for tesla obviously

but anyway the cars come equipped with

the hardware uh hardware does add a cost

to the vehicles but hey it makes sense

because really what they're trying to

pitch is that they're going to be a

future based company that is thinking

about not just electric vehicles but

also self-driving and autonomy and

chargers they're planning their own dc

charging sites and they're going to call

them ran ran dc charging sites and

rivian waypoints

they uh also are going to have a

charging management software both for

fleets and individuals so like you can

check charging on your iphone they're

going to sell charging as a service so

they can continue to milk revenue they

do expect that within two years they

will have

over

3 000 network chargers 3 500 plan

chargers and 600 different installation

sites tesla just for comparison has 10

times as many chargers at about 29 381

and five times as many locations at

3264.

so worth noting

600 sites might sound like a lot tesla's

got 5x that and we're talking about on

brand chargers of course you could

charge it off-brand chargers as well the

company does manufacture its own battery

pack of course they source their

batteries elsewhere

fleet management controls are a big deal

for the company as well since they're

really trying to get into that electric

delivery vehicle space and the neat

thing about those electric delivery

vehicles is it's a space that a lot of

companies are trying to get into but

they're having trouble getting funding

because we're company adoption just

isn't there yet look at for example

canoe another ev rival that really does

these electric delivery vehicles but

canoe has been floundering possibly

because they don't have that consumer

pre-order opportunity or that consumer

buying say a pickup truck or an suv like

rivian might to help fund the

development of the commercial vehicle

side imagine for example if tesla

started with electric semi trucks

instead of an expensive model x and s

it'd be a whole lot harder for tesla to

get off the ground so this is this is a

good strategy by rivie and i support

this and like this but now why is the

company so exciting what is making this

so exciting well the reality is the

company is so excited

well excited in the marketplace because

of an amazon and ford investment and

partnership essentially amazon has

ordered 100 000 electric delivery

vehicles 10 000 of those trucks are due

by the end of the year though we don't

actually expect that many to be

delivered by the end of this year we'll

see the details of the amazon deal

itself like price per vehicle were

redacted from public documents but we

know the deal exists we also know that

it is cancelable so amazon just has the

first right of refusal on up to 100 000

vehicles but they do not actually have

to purchase the the vehicles though

obviously amazon is

financially incentivized to be

optimistic about this deal given that

they've invested a lot amazon has plowed

about 1.345 billion dollars into rivien

so 1.3 almost a half billion dollars

into rivian through stock investments

and another 490 million purchasing bonds

sold in july that's about a 1.8 billion

dollar investment amazon stake is

reported to be 20 percent in rivian and

if reviewing tomorrow ipos and it gets

to a hundred billion dollar valuation

amazon will essentially have taken a 1.5

billion dollar investment and uh turned

it into 20. that is a return of about

13.3 percent i'm sorry 13.3 x so if you

ever want to get rich quick just be

amazon and invest in an electric vehicle

company early by the way that does not

mean you buying at ipo because you're

making that richness happen for amazon

we'll talk more about my expectations

for the stock and what i invest in in

just a moment and now amazon this

partnership obviously very very big it's

worth noting some people are wondering

should you buy amazon stock to invest in

rivian probably not amazon has like a

1.8 trillion dollar market cap so for

every 100 you'd put into amazon only

about 1.1 would actually go to rivian

in terms of that ownership share right

so that wouldn't necessarily make sense

ford by the way also has a 12 stake and

stands to make about 7 billion from

their investment ford by the way spans

plans to spend 30 billion on electric

vehicles through 2025 gm by the way was

also interested but ford ended up

snagging the deal uh rather than gm and

this was back in 2019 when gm was

fighting for the company as well so now

let's get to some revenue per vehicle

and let's let's do some numbers on a

spreadsheet here so revenue per vehicle

we expect lifetime revenue for these

vehicles to be sixty four thousand six

hundred dollars now there's an asterisk

on this because that does include

roughly fourteen to fifteen thousand

dollars of paid software and charging

upgrades

which i i'm not i don't generally like

including in in the actual bundle of the

the cost of the car uh but you can play

this this however you want we're gonna

do it both ways

that way you can make uh your your own

projections now uh regarding deliveries

this becomes very important so revenue

becomes important whether you go with 50

000 or 65 000 per vehicle or you end up

oh i'm sorry you take those numbers and

then multiply it by projections for say

2025 manufacturing these are going to be

your big variables in terms of how

you're going to come up with a

projection for this company so how much

per vehicle take a margin rate uh and

then of course uh how many vehicles

right very very important kind of

simplistic but might sound complicated

it'll make more sense when we put it on

a spreadsheet so in order to do this

there are a few different ways we can do

estimates we could like take a look at

behrens which suggests maybe we'll be

able to sell 800 000 vehicles by 2025.

some folks are more bullish that we

could get to a million by 2025. some

folks are less optimistic they think

we're only going to get to two three

hundred thousand uh some folks think

we're only gonna be at fifty thousand

vehicles by uh 2025. so the numbers are

absolutely all freaking over the place

and this is very important to consider

because when the numbers are all over

the place

it's important as an investor that you

know you are speculating on not

necessarily the stock but on your

expectations for how many deliveries

they're gonna have in four years from

now in 2025. so here's how i made sense

of the numbers and this is sort of just

my expectation the the company here in

their amended s1 which is like 300 pages

long they say that they expect their

total addressable well the total

addressable market for vehicles to be

81.1 million their serviceable

addressable market so like pickups and

suvs they think is about 7.9

mil so some people are just taking a

percentage of that and saying okay well

maybe if 7.9 is the total vehicle market

maybe take 15 percent of that or 10

percent of that or whatever say riven

can get that much

i don't know about that so i'm going to

put that speculation aside i'm going to

show you how i'm going to go with a

totally different number here so market

wide in just the united states which

even though they say u.s and canada and

western europe i'm going to be

conservative and i'm just going to use

u.s numbers here we sell about 13

million commercial vehicles light

commercial delivery style vehicles per

year

we also sell about 17 million pickups

and suvs 14 of pickups eight point eight

percent are suvs uh so well for 17

million sorry we sell about 17 million

cars in the united states per your

personal cars of that 14 of pickups 8.8

or suvs so what we could do is we could

hop on over to a spreadsheet here and do

a little bit of calculating number

crunching the way i like to do it so i

think if we take a three percent share

of all the light commercial vehicles we

get to about 390 000 vehicles keep in

mind that ford has a 14 market share of

the pickup segment okay

maybe they'll get a higher segment but

this is just of the uh this is of all

pickups which is again pickups are 14

of 17 million vehicles sold if rivien

gets three percent that would be 71 000

pickups we can modify this and we will

we'll play with these numbers if ford's

at 14

maybe rivian's going to end up being

that 14 market share in the future which

would obviously drastically change these

numbers but we're going to start the

numbers assuming 3

market share of pickups of suvs and of

light commercial vehicles that brings us

to about 506 000 vehicles for

25. get rid of that that's old okay good

so revenue per vehicle we'll go with the

high number

for now uh er we'll go with 67 000 oh

sorry 60 yeah this is right 60

hold on i'm sorry lifetime revenue

expected to be 64

600. there we go we'll go with this

first so 64 600 lifetime revenue

and so that's why for services i'm

putting in zero here because we've got

the ltr already lifetime revenue already

built into the top here uh so now we're

gonna put robo taxis all that other

stuff we'll just leave that at zero that

would be about 33.5 billion in revenue

if we take a 25 expense ratio and a 22

tax rate slightly higher than the 21

where we are uh we'll probably be at an

earnings per share of about two dollars

and 91 cents in the future

if we multiply that let's get rid of uh

this is price today let's say it's 80

bucks today okay that doesn't matter so

much so if we have a 2.91 eps

uh in the future in 2025 and we multiply

that assuming the company's really

taking off it's it's growing and we

multiply it by a hundred times this

assumes a lot of growth still coming to

the company a hundred times you know if

they're manufacturing 500 000 vehicles

you put 100 pe on it you're thinking

they're still going to grow

substantially

they're going to do

millions of vehicles per year right so

you still have a lot of optimism for the

company by the end of 2025 so in four

years the company could be selling for

290 a share which obviously if you could

buy it now at 80 dollars is a steal so

if you buy today at let's say 80 that

would be a 38 compounded annual rate of

return over the next four years it's 38

38 38 38

that's great uh that's only folks

at three percent uh for each of these

categories it's actually not horrible

now if i take off the lifetime revenue

crap and i'm gonna go a little bit more

conservative and just go with a fifty

thousand dollar vehicle on average which

by the way tesla's average is about

forty nine thousand eight hundred nine

hundred right around there so i think

that's that's fair let's go with this

number still giving them the twenty five

percent expense uh uh

margin over here uh so 75 expense 25

gross profit margin tesla's at about 30

gross profit so a little bit more but

i'm going to be conservative here i'm

going to stick with this margin

this would get us to about 219

still very very very good right and

obviously

i mean these these numbers look look

excellent and phenomenal

but it all comes down to this folks

literally all of it comes down to their

ability to

sell are they going to be able to ramp

to this look in 2021 if we have i don't

know 300 deliveries can we get to

15 000 vehicles in 2022 can we get to 50

000 vehicles here can we get to say i

don't know

200 a thousand vehicles over here in

2024. hopefully you could get there even

sooner right honestly to get to to get

on this path you'd probably have to take

the money and ramp much faster you'd

probably have to be something like uh

this

this kind of ramp schedule where you're

at forty five thousand a hundred

thousand uh two hundred seventy five

thousand vehicles and then eventually

you are at

uh five 500 6 000. that's that's

probably the kind of ramp schedule you

would need to to make this happen

now uh obviously if they don't ramp like

this and the numbers end up being a lot

smaller then the stock's going to suffer

let's say they only get one percent

market share by 2025 which is four years

away 168 000 vehicles 168 000 vehicles

using the 50 000 number over here puts

their stock price at 58

with a hundred times earnings but a

hundred times earnings might not be true

because if they're stagnating they might

only earn a 50 times earnings right this

is where things could just go crap if

they don't get consumer adoption which

you're going to be biased because you're

researching rivian you're researching

rivien stock you're going to be biased

about the stock you're going to be

biased about people's willingness to

adopt and buy the car if another company

comes around and

beats this company substantially to

where nobody's caring about iridium

that's not good so if you're betting on

the stock the most important thing that

you have to ask yourself is do i believe

people are going to buy the car do i

believe that companies are going to buy

an electric vehicle with 150 mile in

range which probably realistically only

has like 100 mile range because we all

know how it goes they estimate a 150 if

you get 100 you're lucky uh or maybe

that's just tesla i don't know but okay

fine let's go back to three percent for

a moment

or or uh and let's let's play it up

let's say they get you know they they

boom time okay and we get seven percent

adoption across the board which should

just be ridiculous you know what i'll

leave the commercial one at three

percent i'll go seven percent for the

the consumers uh here we go four percent

there we go 800 000 vehicles this is

like baron's estimate okay 800 000

vehicles by 2025 and it was just there i

think they were just guessing too okay

800 000 vehicles this could be a 356

dollar stock this 45

compounded annual rate of return so

the biggest

question as to whether or not you should

invest in this company is obviously

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stock doc but outside of that for either

stock investing real estate investing

real estate agent sales or making

youtube videos the big question is

are you in this fundamentally or to

trade it if you're in this to trade it

there's going to be insane momentum

we're in an eevee up cycle there is a

lot of enthusiasm about this this is

going to be at peak media

when it ipos and it is going to taper

after that generally the best time to

buy is when peak media passes the stock

falls it's no longer peak media then you

buy and then you you ride fundamentally

with the company right so if you're

getting into it fundamentally i probably

wouldn't buy it ipo unless you really

think people are going to adopt these

vehicles if you're getting it into

getting into it to trade remember what

coinbase did it went green for five

minutes and then went straight down like

like halved it was horrible it was a

horrible ipo okay that's a cancerous ipo

uh so not to make light of not to

compare cancer to stocks but but anyway

so

do you believe that people are going to

adopt this vehicle

personally if i go with the worst case

scenario i think by 2025

they they make

150 000 vehicles by 2025. that'd be like

a worst case scenario in my opinion

let's go with that let's see what that

looks like uh and that would probably be

about one percent adoption across the

board okay that's about 168

000 uh vehicles by 2025. let's say they

get to 168 by 2025 again it's a loser

at that point you're losing money

investing in this company the growth

rate just didn't sustain so really you

probably have to be at about two percent

across the board you got to get to about

300 000 vehicles uh by 2025 which keep

in mind neo is doing like 10 000 cars a

month they're doing 120 000 cars ish a

year and they've been pumping for a

while so uh you know

personally

at 80 bucks uh if if you believe they

can get to this this production level

great just know it's very difficult to

scale i probably will not buy this

fundamentally until the hype dies down

and if i miss the boat don't really care

uh because i don't have that much cash

around it's not something that i want to

invest in at peak hype uh and i also

have no idea how good their

manufacturing is going to be i have no

idea how good their car is going to be

have no they don't have a charging

network yet why are you going to buy a

rivian with no charging network when you

have to use third-party chargers same

reasons you're buying really a lucid

right now although they have a

partnership with electrify america

rivien's got a long way to go i think it

has hope and promise it's following a

tesla model but hey you know becoming

that number two electric vehicle

manufacturer

it's gonna be hard i wish rivie in the

best i cannot invest in this i think if

it explodes there's a good chance it

hypes down and there'll be a better

opportunity to buy this if i could buy

this at 50 60 a share and uh and and

then as long as i get to 168 000

vehicles by 2025 that's more reasonable

to me so 58 bucks a share below

i like until then i don't care if i miss

out no problem

so that's my video on rivien thank you

very much for watching if you found this

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thanks so much goodbye

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