Better to buy: Rivian or Ford?
Comparing Rivien Automobile (NASDAQ: RIVN) To You’re here (NASDAQ: TSLA) Where Lucid group (NASDAQ: LCID) is one thing. But stage a Rivian side-by-side to a traditional automaker like Ford (NYSE: F) has more striking contrasts. Or does he do it?
Ford is transforming into a diverse automaker and even plans to generate 40% of its revenue from electric vehicles (EVs) by 2030. Now that Rivian is public, EV investors may wonder if it is worth it. buy stock from the new kid on the block or the old dog who quickly learns new tricks. Here is the case for each.
Think long term
Howard Smith (Rivien): Evaluation matters in investing. When stocks take off, many retail investors are not happy if their stocks don’t double overnight. Rivian’s initial public offering (IPO) last week highlighted this again. Stocks immediately shot up, giving the company a higher market cap than an established giant like Ford. Even after a little clearance sale, this disparity persists.
Longer term, Rivian is making a compelling investment, even though it now appears to be overvalued by traditional metrics.
As a start-up, Rivian is very well capitalized after its IPO. He has raised $ 12 billion on top of previous investment rounds that have raised $ 10.5 billion since 2019. And one of those investors is Ford himself, showing that even the historic automaker thinks that. there is a strong investment case here. This comes in part from its other investor partners, including Amazon (NASDAQ: AMZN) and the private company Cox Automotive. Amazon is also a pending customer with its draft order for 100,000 Rivian electric delivery vans. And Cox will support the business with the service needs.
Rivian hasn’t proven anything yet. It needs to run, and its pickup and SUV models need to attract customers as well. But it also starts off with a blank slate, without any baggage that could be tedious trying to spin a juggernaut like Ford. Rivian is not a story of today or even of tomorrow. It is about the long term future. And while the stock will be volatile along the way, there’s good reason to think it’s worth keeping in a portfolio.
Don’t underestimate a seasoned veteran
Daniel Foelber (Ford): Despite being a pioneer in automobile manufacturing and mass production techniques, let alone selling more cars in the United States in September and October than any other company, Ford is valued at less than half of the newcomer Rivian. If you’re wondering how a company like Ford can be worth less, let alone half a company that doesn’t even deliver vehicles, you’re not alone. But as Howard said, the simple reason is that some investors believe Rivian will grow faster than Ford and, over time, become a better all-round auto company. Since he’s starting from scratch, it wouldn’t be surprising if Rivian had a faster rate of income growth for several years. And there’s no denying that Rivian’s esteemed support, killer products, and plentiful cash position are tantalizing. Recognizing Rivian’s potential, Ford became one of the company’s early backers. He currently holds around 12% of Rivian’s capital. In addition to its investment in Rivian, Ford is taking steps that should not go unnoticed.
In its recent third quarter earnings release, Ford raised its guidance for 2021 with a upturn in the semiconductor supply chain. He now expects to earn between $ 4 billion and $ 5 billion in adjusted free cash flow (FCF) and between $ 10.5 and $ 11.5 billion in earnings before interest and taxes (EBIT). Despite reduced pressure on chips, Ford still expects the shortage to continue through 2022 and possibly into 2023.
Ford has several electric concepts in its pipeline. But the two most exciting are the Mustang Mach-E SUV and the F-150 Lightning pickup truck.
The Mach-E was released in 2020 and received positive reviews. In its third-quarter earnings call, Ford said 90% of Mach-E buyers would recommend the car to other customers. Ford has estimated that global demand for Mach-E could reach 200,000 vehicles per year in the near future. More importantly, its highly anticipated F-150 Lightning pickup has more than 150,000 reservations. Ford plans to produce 80,000 a year. To do so, it invested in its Rouge Electric Vehicle Center, its Van Dyke Electric Powertrain Center and its components plant in Rawsonville, Michigan. The Ford F-150 Lightning is expected to have a starting price of just $ 40,000 without the bells and whistles and in the top trim, it will have a range of over 300 miles.
In terms of investments, Ford is spending $ 30 billion on electric vehicles and battery cells by 2025 to generate 40% of electric vehicle sales by 2030. The mid-term goal is to produce 141 gigawatts (GW) of battery, according to Ford. is enough to produce 1 million battery EVs per year. About a third of Ford’s EV investment goes to Blue Oval City, an $ 11.4 billion multi-site project in Tennessee and Kentucky that includes twin battery factories and an EV assembly plant. It is also investing $ 1 billion in a plant in Germany that will go fully electric by 2023.
An exciting industry worth investing in
Although they are completely different companies, it is possible that both Rivian and Ford deserve a place in your portfolio. Rivian is an exciting electric car company with strong growth, while Ford is a more stable and established automaker determined to become a leader in the electric truck market. While we may not agree on the best buy, there is no denying that the electric vehicle industry is rapidly gaining ground in the United States and is poised to support its long-term growth.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.