Rivian vs. Ford – Which stock is worth investing in now?

• Strong growth is priced in at Rivian
• Ford spins off innovative electric car division
• Both companies offer good opportunities after the stock market setback

The stock market downturn as a result of persistently high inflation rates and the Ukraine war particularly affected high-value growth stocks. Since its record high, Rivian has fallen by more than seventy percent. Ford was also unable to escape the downward spiral and – after a very strong performance in 2021 – has also lost ground in recent weeks. Both stocks are therefore currently available at discount prices, especially as the growth prospects for the electric vehicle (EV) market remain excellent. Which of the two stocks could be particularly worth investing in?

Rivian: High growth prospects for a high price

Rivian caused a sensation in November 2021 when it raised $11.9 billion in the largest IPO of the year – with only 42 vehicles sold up to that point. In the first few days of trading, the Rivian price continued to shoot up and reached its previous record high on November 16, 2022 at $179.47. Since then, the stock has plummeted. Still, the Michigan-based company is far from a bargain: The market cap remains above $30 billion — despite a loss of $2 billion in the fourth quarter of 2021 alone on sales of just $54 million . As a result, Rivian is still miles away from making a profit. However, progress is being made in the company’s expansion: In September 2021, series production of the first two fully electric vehicles, the R1T pick-up and the R1S SUV, finally began. In 2021 920 cars were sold, in 2022 it should actually be 50,000, but due to delivery problems this number will hardly be reached. Meanwhile, demand for Rivian cars in the US is very high. The tech giant Amazon, which holds an 18 percent stake in Rivian, also ordered 100,000 delivery vans. The foundations for Rivian’s phenomenal growth have therefore been laid: CEO Robert “RJ” Scaringe’s company has excellent know-how, produces two series models that are in high demand and has a powerful financier in Amazon. Analyst Howard Smith came to the conclusion that Rivian’s clear setback “could offer interested investors a good starting point for an entry” in an interview with yahoo finance. However, Rivian’s continued high rating leaves no room for disappointment of any kind.

Ford: Established company with vision for the future

Ford and Rivian are cooperating competitors: the established Ford group holds eleven percent of the shares in Rivian and had intended to produce two electric vehicles together with the up-and-coming car manufacturer. But Ford CEO Jim Farley abruptly smashed these plans in September 2021 when he told the Automotive News trade journal that Ford wanted to become the second largest electric car manufacturer in the USA after Tesla within two years – and without further ado ended the cooperation with Rivian.

Thanks in no small part to Farley’s announcement of increased involvement in the growing EV market, Ford shares have performed extremely well in 2021. While a share at the Corona low in March 2020 temporarily cost less than four US dollars, the share had multiplied to up to 25 US dollars by January 2022. In order to classify the recent Ford bull market, it should not go unmentioned that Ford shares have seen much better times: The papers reached their previous record level in April 1999 at 37.18 US dollars. The US car icon was therefore a bad investment overall in the past few decades and was not even close to offsetting inflation, but actually lost value.

That should change in the future: At the beginning of March, Ford announced that it would split the company into two divisions. The traditional business with internal combustion engines will be called “Ford Blue” in the future, while the innovative EV division called “Ford Model e” will be decoupled. The goal of the traditional American company is to use the stable earnings from the profitable core business to drive the expensive innovations in the EV sector. Thanks to its enormous market position and economies of scale, Ford has every reason to believe it can have a strong position in the EV business over the long term. Then a new all-time high is certainly within the realm of possibility.

Conclusion: Which of the two companies seems more promising?

Overall, Rivian can be classified as more promising, especially for growth-oriented investors. Thanks to an excellent demand situation, it has a good chance of grabbing a hard-fought market share in the growth market for electric cars. After the enormous price losses since November 2021, the Rivian share currently has a very attractive risk/return profile. Although Rivian is still extremely highly valued with a market capitalization in excess of 30 billion US dollars and sales that are still marginal, if the young car manufacturer should develop operationally well, Rivian shares could stalk closer to their all-time high, which is still a long way off . However, when investing in Rivian, there is enormous volatility to be expected, which is why building up a large Rivian position is not advisable for more conservative investors.

For less risk-averse investors, Ford seems like a good alternative to take advantage of the EV growth market without taking on too much risk. Even if Ford’s vision of the future in the EV market does not fully materialize, the traditional company still offers good prospects for stable earnings and increasing dividends thanks to its size and broad product range. In addition, with a price-earnings ratio of 8, Ford is valued many times cheaper than Tesla or Rivian.

Editorial office finanzen.net

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