Should One Invest in Shares of Rivian Automotive Currently?
Riding the Rivian Wave: A Second Look at America's Electric Dream 🚀
Once upon a time, Rivian Automotive (RIVN 1.32%) was the hottest stock in the market. After its public debut at $78 a share in 2021, it skyrocketed to $172.01 within a week! Investors were smitten by Rivian's ambitious plans, strong partnerships with bigwigs like Amazon and Ford Motor Company, and the excitement surrounding the electric vehicle (EV) boom.
Fast forward to now, and Rivian's stock trades at around $12. So, should investors consider it as a potential turnaround play? Let's dive into the whys and hows of Rivian's rocky ride.
The Bumpy Ride: Production Challenges 🚗
Initially, Rivian hoped to produce 50,000 vehicles in 2022. However, it only managed to churn out 24,337 vehicles and deliver 20,332 to customers. Supply chain hurdles, fierce competition, and an unfavorable economic climate were to blame for this underwhelming growth spurt.
In 2023, the picture improved somewhat, with 57,232 vehicles produced and 50,122 delivered, thanks to resolving supply chain issues and upgrades in their in-house Enduro drive unit. Yet, in 2024, the growth slowed again with only 49,476 vehicles produced and 51,579 delivered. plant shutdowns, technical upgrades, and additional supply chain snags held the company back.
Looking ahead to 2025, Rivian anticipates delivering 46,000 to 51,000 vehicles. Rumors of another plant shutdown in the second half of 2025, fire damage in Los Angeles (one of their top markets), a challenging demand environment, and potential adjustments to federal incentives, regulations, and tariffs have contributed to this gloomy forecast.
The Horizon Awaits: What's Next for Rivian? 🌟
In the fourth quarter conference call, CEO Claire McDonough expressed optimism about the launch of their R2 SUV in 2026, which she thinks will be "transformative" for the company's growth and profitability. However, before that happens, Rivian expects its capital expenditures to soar from $1.14 billion in 2024 to between $1.6 billion and $1.7 billion in 2025. They plan to expand their Illinois plant, resume construction of their new Georgia plant, and expand their Rivian Adventure Network.
Despite the looming expenditures, Rivian is confident that its gross profit—which turned positive in Q4 2024—will remain positive in 2025 for three reasons:
- Improving material, conversion, and depreciation costs per vehicle.
- Selling more regulatory credits to other automakers.
- Expanding their higher-margin software and services business.
Analysts expect Rivian's revenue to climb by 8% to $5.39 billion in 2025, with a narrowing net loss from $2.69 billion to $1.86 billion. With $9.06 billion in total liquidity, including $7.7 billion in cash reserves, the company is in a strong financial position and won't go bankrupt anytime soon.
Is the Time Right for a Rivian Rebound? 🤔
Though Rivian is still a risky bet, its enterprise value of $13.23 billion makes it appear cheap at 2.5 times this year's sales. This could be why Amazon, despite Ford's departure, hasn't sold its 15% stake in the automaker. Therefore, it might be a good idea to snag some Rivian stock at these low prices before the R2 launch in 2026.
2025 will likely be a bit of a rollercoaster for Rivian, but its moderate valuation and stabilizing gross margin could help cushion the impact. If they manage to scale up production of the R2, the stock could skyrocket in the years to come.
- Investors, despite the current low Rivian stock price, might find it a potential turnaround play due to its moderate valuation and stabilizing gross margin.
- Analysts expect Rivian's revenue to increase by 8% to $5.39 billion in 2025, indicating potential growth in the company's financial sector.
- Rivian's confidence in its gross profit remaining positive in 2025 is based on improving costs per vehicle, selling regulatory credits, and expanding its software and services business.
- Amazon, despite Ford's departure, has not sold its 15% stake in Rivian, suggesting a continued belief in the electric vehicle manufacturer's potential.
