A Rivian pickup truck prototype.
Courtesy Rivian
General Motors stock soared to record highs after Microsoft invested in GM’s autonomous-driving company, Cruise. The value of Cruise was like a hidden asset for GM investors.
Ford Motor stock (ticker: F) isn’t close to record highs. And its stock has lagged behind General Motors (GM) in recent months. But Ford has a hidden asset, too—the electric-truck maker Rivian. Rivian, as well as other events coming soon, can help drive Ford stock higher, closing its recent performance gap with GM.
Rivian doesn’t have any sales yet. Ford does. Of course, the outlook for EVs is exciting investors these days, and Rivian’s first vehicle is due this year. Rivian took in another $2.7 billion from outside investors on Tuesday, boosting its value to almost $28 billion, according to The Wall Street Journal.
Rivian’s value is approaching Ford’s total market capitalization. Ford’s market cap is roughly $40 billion. Only six months ago Ford sported a market cap of just $26 billion.
GM stock jumped about 10% Tuesday after its Cruise announcement. Microsoft’s (MSFT) investment increased the total value of Cruise by about $11 billion, and GM owns roughly 70% of the entire Cruise enterprise.
Ford doesn’t own as much of Rivian as GM owns of Cruise. Ford took a minority stake in Rivian in spring 2019. The company hasn’t disclosed its precise stake.
On the whole, details regarding Rivian are thin. The new financing was said to be done at a valuation of about $28 billion, up from a value of roughly $8 billion only eight or nine months ago. Ford referred Barron’s to Rivian about its valuation. Rivian wasn’t immediately available to comment.
If Ford owns, say, 10% to 15% of Rivian—a reasonable assumption according to people familiar with the situation—then the $20 billion value increase in Rivian works out to roughly $3 billion in stock-market value for Ford investors.
Ford stock is up about 4% since news of the Rivian financing broke. That’s about $2 billion in stock market value. It’s possible investors are undervaluing Ford’s stake in Rivian.
Barron’s recently wrote positively about Ford stock, arguing that new management could fix operations and boost profits. Since that article appeared in late November, Ford shares have gained about 13%, better than comparable 3% gains of the S&P 500 and Dow Jones Industrial Average.
Deutsche Bank analyst Emmanuel Rosner sees more gains for Ford stock soon. Wednesday, he put a Catalyst Buy rating on Ford stock. Deutsche Bank uses the Catalyst Buy designation when their analyst believe stocks will rise very soon. They are signaling investors to pay attention to coming events.
Rosner sees three catalysts for Ford stock, including “a solid 2021 outlook on its 4Q earnings call…the launch of a number of key models under its new executive leadership team and Capital Markets Day in the Spring where Ford could reboot its redesign program and present a new EV strategy.”
Ford just began shipping its all-electric Mach-E Mustang. The company announced plans to spend $11 to $12 billion on EV development, generating 40 electrified models. But that goal was announced in 2018 and covered the coming four years.
Rosner, despite the near-term bullish outlook, still rates Ford share Hold and has a $9 price target.
Ford stock is up 4.5% in recent trading, at $10.47. The S&P 500 is up 1.1%.
Write to Al Root at [email protected]
