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Rivian Stock Really Costs 19 Cents. Investors Shouldn’t Forget Cash.

DuoRivians

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https://www.barrons.com/amp/articles/rivian-stock-cash-balance-lucid

Shares of the electric- truck start-up (ticker: RIVN) fell for a fourth consecutive day on Tuesday. First there was the banking crisis, which hit most stocks last week. Then the market learned Monday that Rivian might end its exclusivity pact with Amazon.com (AMZN), freeing up the auto maker to sell electric vans to other customers.

That hit the stock even though having access to more customers could be considered a positive.

On Tuesday, Morgan Stanley analyst Adam Jonas said inefficiencies at Rivian are weighing on profit margins, according to a report from Bloomberg. Morgan Stanley didn’t immediately respond to a request for Jonas’s report.

He rates Rivian shares at Buy and has a target of $28 for the price.

Rivian closed down 3.8% at $13.21. The S&P 500 and Nasdaq Composite rose 1.7% and 2.1%, respectively.

That is an interesting price given the amount of stock Rivian has issued. The company ended 2022 with about $12 billion in cash on its balance sheet, or $13.03 a share. So net of cash, Rivian stock is at 19 cents.

That is a theoretical calculation. Rivian doesn’t generate positive free cash flow and it is spending to grow its business.

Still, Lucid (LCID) stock is trading at roughly $7 a share net of cash. That makes Lucid

‘s enterprise value, which is essentially the market capitalization plus debt, minus cash, roughly $13 billion. Rivian’s is close to zero even though Rivian is actually larger 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 about 12,000 vehicles for a total of $1.3 billion.

It’s tough to explain the valuation difference between the two EV start-ups. “That’s a good question,” said Battle Road Research analyst Ben Rose when asked to explain it.

He offered a couple of potential reasons, but said neither is convincing.

First, while the market might have more confidence in Lucid’s market position, Rose has doubts about whether Lucid can achieve the production it has forecast for 2023. What is more, he said, demand for trucks, Rivian’s focus, is bigger than for the high-end luxury sedans Lucid makes.

Second, Rose says, Saudi investment funds, which own the majority of Lucid, could bail out the business if it runs into trouble. But any injection of cash would likely require the company to issue stock in exchange, diluting the value of shareholders’ existing holdings.

Rose rates Rivian shares at Hold. He doesn’t have a target for the price.

Investors can’t access Rivian’s cash, but the situation is still odd. How it will work out is anyone’s guess.
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Nix

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In my opinion, forget the cash. It is only of value to fund the ramp-ups. It will all be gone eventually.

The value of the stock is eventually selling vehicles for profit. If the price of the stock is valued on the cash, the stock price would be doomed to drop.
 

Sgt Beavis

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The main point is that the stock is cheap as dirt and is a massive opportunity for investors. The problem, IMO, is that the stock isn’t done falling. I think we’ll hit a few more 52wk lows. IMO, there will be another 52wk low today because of this banking fallout.

IF Rivian can weather this economic storm, some of us are going to be rather rich in a few years.
 

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If you believe in the company, now is a great time to buy down your average.
 

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Yossarian

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Does the continuing slide in Rivian's stock price risk making the company an attractive takeover target?
 

jjswan33

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Does the continuing slide in Rivian's stock price risk making the company an attractive takeover target?
Not as long as RJ has voting control.
 

Honey

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I have 980 shares at $21 dca. Not going to buy anymore until I get my r1s.
 

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NY_Rob

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i wish, i had bought at the initial IPO, hurts looking at the stock price.
I honestly don't know what you're trying to say..... but I'll be happy to sell you my IPO shares (100) at the IPO pricing if that will make you happy :D
 

Sgt Beavis

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If you believe in the company, now is a great time to buy down your average.
That's what I'm looking to do. But not yet. There is so much volitility that I expect it to drop further. We've already hit another 52wk low today.

I have 300 shares at $48, so i can really help my average at some point.
 

NY_Rob

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That's what I'm looking to do. But not yet. There is so much volatility that I expect it to drop further. We've already hit another 52wk low today.

I have 300 shares at $48, so i can really help my average at some point.
I swore I wasn't going to buy any more Rivian, but at these prices I'm probably going to purchase another 100 or so just to get my average $/share down too.
 

Nix

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I think the point of the article is:

Relative to Lucid, which is also burning a lot of cash, why is Rivian trading only pennies above cash value, whereas Lucid is trading $7B above cash value?
It makes sense if you forget about the cash, and value them based on their chances of becoming either profitable manufacturing companies, or being bought out.

Forget about the cash. It has already been budgeted to be spent, not distributed to shareholders. If Rivian had that much cash and were already fully ramped up on R1 and R2 manufacturing, it would be a different story. Then the cash would matter, because Rivian could use it to pay dividends out to shareholders, or use it to do a stock buyback.
 
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DuoRivians

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It makes sense if you forget about the cash, and value them based on their chances of becoming either profitable manufacturing companies, or being bought out.

Forget about the cash. It has already been budgeted to be spent, not distributed to shareholders. If Rivian had that much cash and were already fully ramped up on R1 and R2 manufacturing, it would be a different story. Then the cash would matter, because Rivian could use it to pay dividends out to shareholders, or use it to do a stock buyback.

I don't see how you think Lucid has a better chance of being profitable or being bought out than Rivian.
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