Does Rivian deserve a spot in your portfolio let's run through the bull in the bear case
in about five minutes my name is Brian Feroldi and my name is Brian Stoffel.
Brian we recently ran Rivian through our investing frameworks what did we find out
about this company so Rivian is an electric vehicle maker that is still in the r&d stage
but they're about to ramp up to production their first vehicle that they're focusing on is the r1t
which is an electric pickup truck a second vehicle that they're wrapping up production run is called
the r1s and that is a sports utility vehicle that is also 100 electric and the third vehicle
that they're focused on is an electronic delivery vehicle importantly the company has an agreement
with Amazon whereby Amazon will be purchasing 100,000 of these all-electric vehicles for
their delivery fleet now Rivian is doing more than just the cars themselves it's working on a fleet
operating systems that allows fleets of these vehicles to be managed in one location Rivian is
also developing a set of subscription tools that should add high margin revenue to the company's
top and bottom lines like insurance it also offers subscriptions to a charging network or products
that can be bought for your home and it offers a subscription whereby if you are a member you can
have service done on your vehicle by a mobile team that comes to you where you're at brian there's a
lot of excitement in this company right now it's not hard to figure why so let's go through the
bull case from here first off the opportunity here is unbelievably massive the global transportation
market is measured in the multi-trillions of dollars and there's no doubt right now that the
world is transitioning away from the internal combustion engine towards electric vehicles
that gives this company an almost unlimited runway for growth because we're still in the
r&d stage with this company it's tough to know if their products are for real so the fact that
amazon is willing to agree to purchase a hundred thousand of these vehicles is an enormous vote of
confidence for what they're developing third we were impressed by the high levels of skin in the
game ribbian's founder and ceo owns a meaningful amount of stock and it's also worth pointing out
that both amazon and ford have taken significant ownership positions in this company but as with
any automaker that's trying to start off just off the ground there are huge risks that we need to
know about first and foremost is simply execution producing a new line of vehicles and creating your
own infrastructure to do it is very difficult elon musk has said many times that he had no idea what
he was doing when tesla started they eventually figured those problems out but it points to how
difficult it can be to start something like this out of nothing second is rising competition tesla
essentially had the market to itself while it was getting going but riven is launching its vehicle
when tesla exists and every other automaker on the planet is launching their own electric vehicles
Rivian might find it hard to stand out in a crowded field finally as you might expect this
company is burning through cash both in terms of profits and free cash flows that's to be expected
and the company will likely have to raise more funds in the future diluting current shareholders
but the company needs to prove that eventually there is a path to whereby it can keep money from
free cash flow to have this company score on our investing checklist before we get to that number
we wanted to give a shout out to motley fool stock advisor both brian and i were paying members to
motley food stock advisor for many years and we both found tremendous stock picks by subscribing
to that service if you're interested in giving motley food stock advisor a try visit fool.com/feroldi
to get a 50$ discount on annual subscription so how did Rivian score on
our investing checklists no surprise here for me this company only got a 34 which is well into my
why bother category that doesn't mean that the opportunity ahead isn't huge it just means that
the company is extremely early in its production phase and we're nowhere close to seeing actual
financial performance and brian my framework doesn't penalize companies the same way for the
same things that yours does but it still landed with a score of a six which is in my fragile
category i'm excited to see what this company does i'll be rooting for them but i won't be investing
exact same thing for me there's meaningful room for improvement and once the company actually
starts producing vehicles and playing in revenue its score will improve meaningfully from here
so what should investors watch moving forward the number one thing to keep your eye on is production
and execution it's one thing to have hundreds of thousands of orders lined up it's another
thing entirely to actually make and deliver the vehicles two we already touched on the fact that
the company is facing much more competition than tesla face when it came into this market even if
they get production up to where it should be they need to prove that people want to buy them so we
need to look at the sales figures that Rivian is putting up finally there's no doubt in our minds
that Rivian is going to be ringing up losses for many many years to come it raised a boatload of
capital its ipo that should give this company plenty of cash to burn through but investors
still want to keep an eye on the company's bottom line overall both of us think that ribbon is a
fascinating company and we'll be watching it from the sidelines with great interest brian's out