If you invested $10,000 in Rivian in 2021, that’s how much you’d have today

Once the darling of Wall Street Rivian (RIVN 2.50%) has fallen out of favor with a large number of investors.

This is not entirely the electric vehicle (EV) manufacturer’s fault. For a variety of reasons, manufacturers in general and EV makers specifically are suffering, and investors are punishing their stocks. Rivian is one of the EV companies most affected by this.

Short circuits

It might be hard to imagine now, but Rivian was a hot item when it was released in November. The IPO price was $78 per share, and thanks to strong demand, it rose to nearly $107 when the stock opened for trading on Nasdaq.

A $10,000 investment that morning would have netted an investor almost 94 shares. Today, those shares are worth just $2,824, down 72%.

As mentioned, we can’t lay this entirely at the feet of poor Rivia. With economic worries on the rise, many investors are shedding stocks of what they consider riskier businesses in favor of those supposedly more recession-proof. And in the EV industry in particular, shortages of essential components like computer chips and tight supplies of commodities like lithium (a key raw material in EV batteries) are having a detrimental effect on production and shipments.

These issues are difficult for all EV manufacturers – just ask the no doubt worried managers Tesla (TSLA 0.74%) AND Neo (NIO -1.57%). However, they are particularly challenging for the smaller Rivian, which unlike those two relative veterans, only started rolling out vehicles from its factory in December.

As such, it is already absorbing losses as an early-stage manufacturer with limited shipments. And these shipments are significantly lower than originally anticipated. In March, management announced that due to the challenges mentioned above, Rivian would deliver only about 25,000 vehicles in 2022. This is well below the 40,000 previously forecast.

So it’s no surprise that Rivian stock has performed so poorly. Neither Tesla nor Nio have had it easy, but these two companies in the electric vehicle industry have been more resilient. Tesla’s share price has fallen “only” 31% since Rivian’s first day of trading, while Nio has shed 49% of its value.

Offering a brighter future?

To meet its challenges, this month, Rivian management revealed to employees that it will launch a cost-cutting program. Details have been scarce so far, as the initiative has yet to be made public, but according to Bloomberg (which cited sources “familiar with the matter”), management could lay off up to 5% of the company’s 14,000-strong workforce.

However, I think this is by no means a bad time to invest in Rivian. The company has a lot going for it, even as it comes of age at a difficult and nervous time for the auto industry and its vibrant EV segment.

The company has three models with excellent sales potential – the R1T pick-up truck, the R1S SUV and the specialist delivery vehicle for which it is producing Amazon (NASDAQ: AMZN). Yes, only R1T shipments have been made so far. Still, the R1S should be a popular option for SUV enthusiasts who don’t want to pay a minimum of nearly $100,000 for a Tesla Model X. (The R1S’s current starting price is just over $72,000.)

And, of course, there’s the actual jewel in Rivian’s crown, the Amazon contract.

The company hasn’t yet started delivering vans to Amazon, alas, but both the e-commerce giant and Rivian are thinking long-term anyway. Amazon’s order is for 100,000 such electric cars by 2030, and while it would certainly like to use some of them as soon as possible to help reduce fuel costs, it can expect the benefits that it will to bring Rivian vehicles. I don’t think there’s much risk of Amazon backing out of the deal.

No car manufacturer is going to make a sudden and spectacular recovery from their industry’s current woes. As a relatively early player in this game, Rivian may take longer to recover than his peers. But thanks to that monster IPO, it’s sitting on a big pile of cash ($18 billion, as of late March) and should be able to weather the bad times. And the good times feel like they’re not far down the road.

John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Nio Inc. and Tesla. The Motley Fool recommends the Nasdaq. The Motley Fool has a disclosure policy.

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