Updated: Nov 24, 2021
At the time of writing for my previous article (did a comparison against Tesla and other EV start up) on EV bubble , Rivian (NASDAQ: RIVN) was priced at USD 129.95. Now, it has rose appx another 32% to 172.01 as at 16 Nov. Its market cap has since swell to 146.7B. To put things into perspective, Volkswagen valuation is (now) 120.9B. Volkswagen net income for 2020 is 8.33B. Although Rivian has powerful shareholders - Amazon and Ford, it has yet to prove itself as it has no meaningful revenue since its incorporation in 2009.
To add in another comparison point - Lucid, another EV start up's market cap has exceeded that of Ford as its share price has also shot up to close at $55.52. Lucid has a market cap of 89.9B at this time of writing. Ford market cap is now at 79.1B.
To give some background information on Lucid, its CEO, Peter Rawlinson, was an ex-Tesla Chief Engineer. He has engineered Tesla's Model S a decade ago. The recent rise in share price is seemingly attributed to the announcement on new reservations and 2022 vehicle production (20,000 vehicle target), while the Company reported a net loss of $524.4 million in the third quarter. Also, Lucid has lost $1.5B through the first nine months of the year.
How much longer can this EV mania last?
The legendary big short guru (remember 2008 subprime crisis?)- Michael Bury, has recently expressed his opinion on the stock market valuation - citing that:
- S&P 500 nominal PE is at 26
- Before 2008-2009's 58% crash, S&P PE was at 18
- Before 1929-1932's 80% crash, S&P PE was at 20
- Before 1973-1975's 48% crash, S&P PE was at 19
Based on my interpretation of his views on the ratios above - unless the earning results for the next quarter is horrible, the stock market mania/bubble might last until then.
For clarity, a snapshot of the S&P PE ratio is shown below. The high PE ratio during 2009 was an indication of the poor earnings. The constant inflation number screaming in our faces might well be a catalyst for poorer earnings as consumers fear intensified and reduce their consumption/spending.
That being said, most market crash are usually sudden and impossible to foresee (Michael Bury was right once on the subprime crisis but there are not a lot of Michael Bury out there). It is rather impossible to time the market. My personal philosophy is to invest during different periods and conserve a reasonable amount of war chest for any sudden massive drop.
This is not a financial advice so please do your own due diligence before committing your financial resources to any investments.
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