Where Will Rivian Automotive Stock Be in 3 Years?

The small electric vehicle manufacturer has a challenging road ahead.

Rivian Automotive (RIVN), known for its electric trucks, SUVs, and delivery vans, made its debut on the stock market a little over three years ago. The stock jumped from an initial public offering (IPO) price of $78 to $106.75 on its first trade, quickly reaching a peak of $172.01 within a week.

However, the current trading price of Rivian's stock is around $15. Similar to many electric vehicle (EV) manufacturers, Rivian has seen a decline in its market favor due to issues in supply chains, challenges in achieving production targets, and significant financial losses. The question now is: can Rivian revive itself in the coming three years?

What transpired for Rivian in the past three years?

Rivian drew significant attention early on due to backing from major companies like Amazon and Ford Motor Company. The company has developed three varieties of electric vehicles: the R1T pickup truck, the R1S SUV, and delivery vans for Amazon. Initially, Rivian had plans to collaborate with Ford on an electric pickup, but that partnership ended in late 2021.

Before its public offering, Rivian projected that it could manufacture 50,000 vehicles in 2022. However, the company only produced 24,337 vehicles and delivered 20,332 within the year. The significant underproduction was attributed to constraints in supply chains and various external economic factors. This disappointing performance prompted Ford to sell off most of its stake in Rivian in 2022.

By 2023, Rivian seemed to have alleviated some supply chain challenges and increased its production, resulting in 57,232 vehicles produced and 50,122 delivered throughout the year. Yet, Rivian's forecast for 2024 is a production estimate of just 47,000 to 49,000 vehicles, along with expected deliveries of 50,500 to 52,000. The anticipated decline is due to a temporary shutdown of its primary factory in Illinois for upgrades, ongoing supply challenges, increased competition, and high-interest rates. Analysts predict that Rivian's revenue will experience a modest increase of just 5% this year, a stark contrast to the 167% growth achieved in 2023 and 2,915% in 2022.

What does the future hold for Rivian in the next three years?

Despite the disappointing forecasts for 2024, Rivian could potentially see a resurgence in growth over the next three years. The company plans to introduce a budget-friendly R2 SUV in 2026, alongside the more luxurious R3 and R3X SUV models in 2026 and 2027. Additionally, Rivian is committed to fulfilling Amazon’s order for 100,000 electric delivery vans, which will continue until 2030 while aiming to secure more customers for these vans.

Volkswagen has also formed a joint venture with Rivian, announced in June, to collaborate on new EV architecture and software development. Volkswagen intends to invest up to $5 billion in Rivian and the joint venture over the next two years. This investment should help Rivian increase its production capabilities and growth potential.

In line with its expansion efforts, Rivian is planning to build a new $5 billion facility in Georgia, which could potentially triple its production capacity. Groundbreaking for this plant was initially set for this year, but the company has delayed it to focus on the rollout of the R2. Recently, Rivian secured a conditional loan of $6.6 billion from the U.S. Department of Energy to help move the construction forward. If everything goes to plan, mass production of the R2 and R3 models could begin in Georgia by 2028.

Although analysts believe Rivian will remain unprofitable in the near term, they predict the company's gross margin could turn positive by the fourth quarter of 2024 as production improves and the Enduro drive unit is utilized in more vehicles. Rivian has also been streamlining operations, reducing its workforce, cutting costs, and indicates sufficient cash reserves to enhance production levels.

If Rivian adheres to its long-term plans, analysts forecast a compound annual growth rate (CAGR) of 21% in revenue from 2023 to 2026, indicating healthy growth for a stock currently valued at just three times this year’s sales. In comparison, Tesla, a larger and more profitable competitor, trades at 13 times its projected sales for the year. Should Rivian meet Wall Street's expectations, achieve additional revenue growth of 20% in 2027, and trade at a more favorable five times sales, its stock could soar nearly 260%, pushing its market valuation to about $47.5 billion by 2027.

Is Rivian a smart investment right now?

Rivian presents itself as a highly speculative stock. However, it possesses a low valuation, a well-defined future strategy, and enough support and liquidity for its immediate objectives. Notably, Amazon has retained its investment in Rivian, even after Ford divested its shares. Thus, Rivian stock may still be a worthy buy for those able to navigate through the potential volatility over the next three years.

Rivian, Stock, Future