With Rivian (RIVN) Valued At $100 Billion, We Are Getting Ford's $12 Billion/Year EBIT and 2% Dividend For Free!

11 Nov 2021 12:50 PM EST

Shares of electric car-maker Rivian debut on the Nasdaq yesterday, soaring from the initial IPO price of 78$/share to ~105$/share. Shares advanced to $120/share today, valuing this pre-revenue electric car-maker at ~$100 billion market capitalization. This compares to S&P500's $1 trillion market cap for Tesla (TSLA), pre-revenue Lucid (LCID)'s $58 billion market cap, Chinese start-up pre-earnings NIO's $66 billion, and legendary automakers Ford (F) and General Motors (GM)'s market caps of $78 and $86 billions respectively.

Rivian has delivered 156 electric trucks so far, bringing in less than $1 million of revenue and operating at a loss of $1.2 billion per quarter. Essentially we call this company pre-revenue. Next year they have the capacity to produce 150000 cars (capacity; no idea about how supply chain issue affects them), bringing them 8 billion in revenue (not earnings).

Let's compare that to Ford Motors (F). Ford reported their Q3 2021 earnings not so long ago. Across the world, they sold about 1 million cars during the quarter, bringing in $35 billion in revenues (this quarter). For the whole year, they will earn $10.5 billion before interests and taxes (EBIT). They also will start giving investors 2% dividend. In case it's not obvious, Ford sells both combustion engine and electric cars.

Trying To Value Ford's Electric Vehicle Segment Alone Alongside Rivian

Let's separate out Ford's Electric Vehicle Segment out for comparison (there's nothing called such that, but we mean let's look at the electric part of Ford Motors). Their current front-line electric products are the Ford F-150 Lightning, Mustang Mach-E and E-Transit. The F-150 Lightning is the first electric version of the best-selling pick-up truck in America for more than 4 decades - the legendary F-150. The F-150 Lightning will start deliveries next Spring, current production rate is 80000 cars a year, while they've already received 150000 pre-orders. The Mach-E is the electric version of the ever-famous Mustang. In 2021 to date, they've delivered 19000 of the Mach-E (they also sell the Mach-E across the world). Lastly, the E-Transit is an electric version of the 16-passenger van Transit. The E-Transit will go on sale next year. All of these numbers are compared to essentially 0 electric cars that Rivian has delivered.

We Are Really Getting Ford's Business For Free

Let's say Ford is not earning any money from its electric car segment right now. With production of 80000 F-150 Lightning alone next year, in addition to the Mach-E and E-Transit, Ford will have pretty much the same production capacity as Rivian. Then we say Ford's  Electric Vehicle Segment and Rivian will have similar potentials. Ultimately, if right now Rivian is worth $100 billion, Ford's Electric Vehicle Segment should be worth as much as $100 billion.

But the entire Ford Motors Company, which will deliver $10.5 billion EBIT this year, giving back to investors 2% dividend yield, is valued at $78 billion (4/5 of Rivian's current value right now). 

How is that justified? Do you see value when you invest in Ford? Do you agree Ford is cheap right now? Do you think it is easy to compete with Ford's F-150, the best-selling truck in America for 4 decades? Would you go buy a Ford F-150 Lightning for $40000, or buy a newbie Rivian truck for $70000? Send us your thoughts!