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Rivian vs. Fisker: Which Electric Vehicle Stock Is a Better Buy?

Rivian (RIVN) and Fisker (FSR) are two electric vehicle (EV) manufacturers that are estimated to gain significant traction in the upcoming decade. However, the two companies will have to expand manufacturing capabilities at a brisk pace in order to benefit from economies of scale and lower cash burn rates.

Most electric vehicle (EV) stocks have outpaced the broader markets since the bear market of 2020. As governments are likely to continue to provide a range of subsidies to drive the widespread adoption of EVs, these companies remain top bets for long-term investors.

Today I’ll analyze two relatively new EV stocks in Rivian (RIVN) and Fisker (FSR) to determine which is a better buy at current prices. Rivian is a recent IPO valued at a market cap of $92.62 billion while Fisker is trading at a market cap of $4.83 billion.  Both companies are yet to generate any meaningful sales but are poised to grow top-line at a rapid pace going forward. 

Rivian is backed by Amazon and Ford

A primary reason for Rivian’s steep valuation is the 20% stake of Amazon (AMZN) and the 12% stake of Ford (F) in the company. In fact, Amazon has placed 100,000 orders for Rivian’s electric vans which is worth a cumulative $5.3 billion. Additionally, the pre-orders for Rivian’s R1T pick-up trucks stand at 71,000 worth $4.8 billion.

Rivian basically has an order book of $10.1 billion which makes it extremely attractive for EV investors. In order to expand its manufacturing capabilities, Rivian will invest $5 billion to build a new facility in Georgia. The plant will be able to assemble around 400,000 vehicles each year at peak capacity with production expected to begin by 2024. Additionally, Rivian is also expanding production capacity to 200,000 vehicles at its Illinois plant, up from 150,000 vehicles.

Alternatively, Rivian has delivered 386 vehicles and manufactured 652 vehicles, as of December 2021 and is unlikely to hit its shipment target of 1,200 vehicles this year.

In addition to auto sales, Rivian is also looking to derive revenue from a range of services that include financing, insurance, charging, and resale. It also expects to generate recurring cash flows after charging commercial customers a subscription fee for the use of its fleet management platform.

Fisker is flying under the radar

Fisker is not a well-known electric vehicle player but is poised for exponential growth in the upcoming decade. Last month, Fisker revealed its first electric vehicle and disclosed the production of the SUV Ocean remains on track. Fisker also claimed it received over 18,600 pre-orders as of November 2, 2021, which led to a slew of analyst upgrades in the following days. 

For example, Credit Suisse analyst Dan Levy is optimistic about the Ocean SUV’s stylish vehicle design and a compelling price point.

Fisker confirmed the three versions of the Ocean SUV called Ocean Sport, Ocean Ultra, and Ocean Extreme are priced at $37,499, $49,999, and $68,999 respectively. The production of these vehicles should begin in Q4 of 2022 which has been outsourced to noted contract manufacturer Magna International (MGA).

The verdict

Both Rivian and Fisker are trading significantly lower compared to record highs, allowing investors to buy the dip. However, the already expensive valuations of the two companies make them vulnerable if markets turn bearish.

Manufacturing automobiles is extremely capital intensive and both Rivian and Fisker will have to increase production capacities rapidly to benefit from economies of scale and post consistent profits.

Between these two EV stocks, I believe Rivian is currently the better investment.  Though Rivian burnt over $1.5 billion in cash to sustain operations in the last three quarters, the company also ended Q3 with $20 billion in cash. Further, the investments made by Amazon and Ford provide Rivian with enough financial flexibility for the foreseeable future.

RIVN shares were trading at $97.00 per share on Wednesday afternoon, down $5.87 (-5.71%). Year-to-date, RIVN has declined -3.70%, versus a 29.13% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.


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