Coinbase vs Rivian - Which Is A Better Buy?

Both stocks have good potential for long-term growth 

Last Updated December 17th 2021
5 Min Read

Key Points:

  • Close to half of the stocks that did an IPO in 2021 are down by 50% off their post-IPO highs. 
  • RIVN is more than 30% off its November 2021 highs, but a fast-growing market makes it a high potential stock to watch. 
  • COIN is down by close to 30% from its November 2021 highs, but innovation and growth in the crypto market give it solid long-term prospects.  

The best time to buy stocks or pretty much any other financial assets is in times of market corrections. The risk level is lower when you get in at the bottom, and the potential reward is higher. 

Using this rationale, the best stocks to watch going into 2023 are those that have done IPOs within 2021. While a lot of them are high-potential stocks, a majority of them have underperformed the broader market by a huge margin. 

Out of the 55 companies that have done an IPO this year, 23 of them are more than 50% off their post-IPO highs. Among them, one of the better performers is Globalfoundaries (GFS), which is down by less than 20%. 

This doesn't mean that the fundamentals for these stocks are weak. Some of them have the potential to change their industries and society at large. This analysis compares two high potential stocks that did IPO's in 2021, but have taken a beating. 

The two are Rivian Automotive (RIVN), and Coinbase Global (COIN). Through this analysis, you will better understand which one among them is at a better entry point after the post-IPO selloff. 

Rivian - New Entrant Into The Electric Vehicles Market

The electric vehicle market is gaining traction as more people understand fossil fuel engines' dangers to the environment. This has seen electric car companies become a darling for investors this year. For instance, Tesla's (TSLA) stock has shot up this year and made Elon Musk the richest person in the world. 

Interestingly, Rivian, an electric car company backed by Amazon, has not performed well since IPO. Rivian went public this year and peaked out in November. However, RIVN has been down by 30% since that time. 

Before the crash, Rivian hit a high of $179.40, a price that gave it a market capitalization that was higher than 90% of the S&P 500 companies. For context on how big Rivian had become at peak prices, it had a bigger market capitalization than Starbucks (SBUX) and Boeing (BA). 

However, like all other growth stocks that rally too hard, too quickly, the bubble popped. That said, the fundamentals remain strong. Rivian is specialized in making electric SUVs and Pickup trucks, and demand is on the rise. 

While Rivian is still a relatively new entrant into the EV market, it has already started delivering on orders. The company's production is expected to hit 150k at some point in 2023.

That said, analysts believe that Rivian's potential sales are already priced in. This is evident in the ratings that analysts have for Rivian. JP Morgan analysts, for instance, are neutral RIVN. JP Morgan believes that while there is a lot of growth potential, this has already been factored into the price at the moment.

Goldman Sachs, a top market analyst, also has a neutral rating for Rivian. Goldman's neutral rating is based on the challenges of successfully entering the automotive market. Goldman cites the challenges that top electric car maker Tesla has faced so far to reinforce its standing on Rivian. 

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Coinbase – A Major Player In The Fast-Growing Cryptocurrency Space

Like Rivian, Coinbase rallied post-IPO then crashed shortly after. Since its rally in November, when it made new highs, Coinbase is down by 30%. 

Coinbase's price decline shows a major mismatch with its fast-growing fundamentals. Coinbase is the number one cryptocurrency exchange in the US and also the first one to trade as a public company.

Thanks to its position as the number one exchange in the US, Coinbase is set to benefit from the growing adoption of cryptocurrencies by institutions and individual investors. This means COIN fundamentals are strong, and its potential for value appreciation is quite high. 

Coinbase's recent slide in value is mainly short-term in nature. The selloff started when Coinbase missed Q3 revenue estimates. Long term, analysts believe that COIN has a lot of upside potential going into the future. 

According to analysts at JP Morgan, Coinbase is likely to both influence and benefit from the cryptocurrency market growth. JP Morgan analysts further believe that there are multiple opportunities for growth due to its ability to attract the best talent in the cryptocurrency industry.

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So Which One Is Better?

Coinbase and Rivian have a high growth potential going by their fundamentals.  

With an ongoing global shift away from the internal combustion engine, electric car companies like Rivian are likely to benefit significantly. While challenges exist in this market, especially in the manufacturing aspect of it, the opportunity is huge. 

Similarly, Coinbase may face short-term revenue challenges due to fluctuations in the cryptocurrency market. However, these are short-term issues, given that as crypto adoption grows, the wild market fluctuations will also decline. 

Besides, the cryptocurrency market is still early, and technology is evolving. In just a few years, new aspects to the market such as DeFi and NFTs have come up. These all create new avenues for growth that will add to Coinbase's bottom line. Recently, Coinbase announced a DeFi yield product for its non-US clients. This is an indicator of how much potential COIN has going into the future. 

It makes sense for an investor to hold both Coinbase and Rivian stocks based on these fundamentals. Their recent price crash has only moved prices closer to the core fundamentals. This means investors could be getting fair value for money buying into these two stocks at current prices. 

To keep the risk of investing in these two growth stocks low, you can choose to dollar-cost-average into both. This means you would be building your portfolio over time without committing a lot of money at once.

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