It’s shocking, really. Two companies with multi-billion dollar valuations and no revenue — and their shares are falling!? This isn’t supposed to happen!
Rivian (NASDAQ: RIVN) and Lucid Motors (NASDAQ: LCID), two days ago were worth a combined $240 billion. Today, the combined value is $185 billion, a more than $55 billion haircut. Poof! Gone — see ya.
The bubble brigade
Rivian, the newcomer of the bunch is an EV pickup and delivery van manufacturer. Founded by CEO Robert Scaringe in 2009, he combined his two favorite things, cars, and nature, to create an EV pickup designed for pioneers, explorers, and adventurers alike.
Rivian has been slow getting to market, but it still has the first-mover advantage in the EV pickup space, as well as the backing of tech giant Amazon, which owns a 22% stake in the company. Many have shied away from pickups in the past due to their gas-guzzling nature, but by going electric, these monstrous machines don’t weigh on the environmentally concerned mind.
Rivian even has an ecosystem of products and services to serve customer financial, insurance, charging, and technology needs too. For more on Rivian’s financials and growth prospects, check out this pre-IPO analysis article.
Lucid is a luxury EV manufacturer founded in 2007 by Peter Rawlinson, the ex-Chief Engineer working on Tesla’s (NASDAQ: TSLA) Model S. The company boasts the EV with the best range and has recently won the 2022 MotorTrend Car of the Year award.
And it’s definitely luxurious, with its ‘Pure’ model starting at $77,000, and its ‘Dream’ model costing as much as $169,000. Lucid targets a particular cohort, typical to the Rolls Royce, BMW’s, and Jaguars of the traditional car world, and it has done an excellent job of communicating that in its brand. For more information on Lucid, check out this article.
Wait, I thought they were bad companies?
I actually don’t think so. I think both companies have unique business models and have positioned themselves quite well in a new, changing market.
However, the valuations are completely out of whack.
Both of these companies have little to no earnings and have only recently debuted on public markets. We don’t know if there are or there will be issues with the cars/pickups when produced on a mass scale, and we don’t know if either of the companies will be able to even produce on a mass scale.
If we look at Tesla as a comparison, its valuation hovered around $30 billion to $50 billion from 2013-2017 before it took off. A company that pioneered an industry, had a massive first-mover advantage, and almost went bankrupt at the time, was valued well, well, below where these companies are at now.
This isn’t about glorifying Tesla either, its valuation is out of whack too in my opinion, but it has made its mark. It also has or will have, several other revenue streams in AI, robotics, autonomous vehicles, batteries, solar, merchandise, and from its charging network.
I really like both Rivian and Lucid, but from a valuation perspective, there is potential to head far, far, lower, so please practice caution when investing in these hyped-up stocks.
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Financial Writer at MyWallSt
David's favorite stock is Google. He's a daily user of its YouTube platform, where you can learn or find something brand new at the touch of a button. He believes the company will continue to grow for many years to come.