Rivian Automotive (RIVN) Stock News and Forecast: Why is Rivian valued so high?

Rivian (RIVN) stock continues to surge post its highly successful IPO last week. The stock has ridden a wave of positive investor sentiment to the electric auto space with Tesla surging to record highs before Elon put the brakes on that particular move. He also commented on Rivian's successful launch saying that Tesla was the only American carmaker to reach high volume production and that is the test for Rivian. Regardless Rivian (RIVN) continues to trade and trend positively. It remains one of the top stocks on mainstream and social media and it appears retail investors are still piling into the name. 

Rivian (RIVN) stock forecast

The background is by now well established. Rivian is an electric vehicle manufacturer with a focus on pickup trucks, SUV's and delivery vans. It is backed by Amazon and Ford. Amazon indeed has placed an order for 100k electric delivery trucks. The IPO was the fifth biggest in US history and the biggest IPO in the world so far in 2021. Rivian raised about $12 billion in the IPO and as of Friday's close, the EV maker is worth $110 billion. Now we have done this previously but many of our readers are asking us why Rivian is valued so highly and the answer is complicated.

Why is Rivian (RIVN) valued so high?

Firstly let us just illustrate how this valuation is compared to its peers. Volkswagen Group sells about 10 million cars per year and is worth $120 billion so similar to Rivian. Rivian aims to fill its orders for about 55k vehicles by 2023 and 100k vans by 2025. Ford is worth $78 billion and sells about 5 million cars a year. Both VW and Ford (F) have strong plans to pivot fully to EV in the next few years so will have Rivian directly in their sights. General Motors (GM) CEO Mary Barra said after the Rivian IPO that GM is clearly undervalued. 

Even compared to Tesla (TSLA), itself often quoted as highly overvalued, Rivian still looks absurdly high. Tesla (TSLA) has a market cap of $1 trillion. Tesla should sell about 800k vehicles in 2021. That is right now, not 2023 or 2025 when Rivian aims to fill its orders. But Rivian is still worth slightly more than a tenth of Tesla. 

So why so high? A combination of reasons. We are in unprecedented times in stock market valuations. Years of ultra-low inflation and interest rates have led investors to all but ignore fixed income as an investible asset class. Property or the stock market are the only viable means of investment for many. This has pushed valuations up to extremely high levels for some stocks. We also are on the cusp of a revolution in the automobile sector with electrification now well past the tipping point and complete electrification of the entire global auto industry merely years away. The sector is hot hot hot and commanding high valuations. Speculative fervor is also high and this has helped Rivian. We live in the age of volatility and instant access to the stock market from smartphones. This has given retail traders unprecedented access to financial markets allowing them to jump in en masse to the latest trend. EV stocks are the latest trend. Momentum has become a hugely powerful force in short-term trading. Momentum has always created momentum until it doesn't. But with access to instant trading and information this process has just been turbocharged meaning the elastic band analogy of markets means they now stretch even further than before, then they eventually snap back. 

It should be noted numerous stocks have retraced sharply after successful IPO's. Facebook, LinkedIn even Roblox this year was steady until last week's move higher. 

Rivian (RIVN) stock forecast

It is very early to forecast technical analysis as the chart is in its development stage. However, the 15-minute chart does show already some key levels. $125 is support being the high from Thursday and tested on the lows from Friday. $110 is the next support and below that there is a volume gap until $101 where volume is again high. We think this one has gone too far fundamentally but it is all about momentum as mentioned.