Rivian Cars (NASDAQ: REVIN) It attracted a stampede of bulls with its initial public offering on November 9, 2021. The electric vehicle (EV) maker went public at $78 per share, and its stock opened at $106.75 before hitting a record high of $172.01 just one week later.
At that peak, Rivian’s market cap was $153 billion, which was 92 times higher than the revenue it would generate in 2022. The small company briefly achieved Electric vehicle maker More valuable than Ford or GM.
Rivian stock initially rose for three reasons: It was previously supported Amazon Ford, which was already producing thousands of electric cars, went public at the height of the meme stock craze. But today, Rivian shares trade at around $10, giving it a much lower market cap of $10 billion. This is less than double the revenue it is expected to generate next year.
The bulls fled as Rivian’s growth slowed, it posted huge losses, and rising interest rates dented its bubbly valuations. Ford also abandoned plans to co-develop an electric pickup truck with Rivian in 2021 and divested most of its stake in the company in 2022. But could buying Rivian now while the market is avoiding it, setting you up for huge gains in the future?
Why did Rivian disappoint its investors?
Rivian currently produces three vehicle models: the R1T pickup truck, the R1S SUV, and a dedicated delivery van that it sells to Amazon. Before its public appearance, Rivian claimed it would produce 50,000 vehicles in 2022. Instead, it produced 24,337 vehicles, and delivered only 20,332. It blamed these disappointing numbers on supply chain constraints, slow growth of the electric vehicle market, and other macro headwinds across the industry.
In 2023, Rivian overcame these challenges to produce 57,232 electric vehicles and deliver 50,122 vehicles. Its growth accelerated as it resolved its supply chain issues and ramped up production of its in-house Enduro drive unit to cut costs.
But for 2024, Rivian expects to produce only between 47,000 and 49,000 vehicles. Once again, it blamed supply chain problems — but its problems were exacerbated by the temporary shutdown of its main factory in Illinois for upgrades in April, intense competition in the electric vehicle space, and rising interest rates. It expects its deliveries for the full year to reach between 50,500 and 52,000 electric cars.
Can Rivian finally expand its business?
Rivian’s revenue rose 167% to $4.43 billion in 2023, but it narrowed its net loss slightly from $6.75 billion to $5.43 billion. For 2024, analysts expect its revenue to rise just 6% to $4.71 billion, but they expect its net loss to narrow to $4.88 billion. These losses are steep, but Rivian still had $9.18 billion in total liquidity (including $7.87 billion in cash, cash equivalents, and short-term investments) on its books at the end of June.
Volkswagen It also launched a new joint venture with Rivian in June to co-develop new architecture and software for electric vehicles. As part of the deal, the German automaker plans to invest Up to $5 billion In Rivian and the joint venture over the next two years. This new cash should give Rivian breathing room to bring its new, cheaper R2 SUV to market in 2026, launch the higher-end R3 and R3X SUVs in 2026 and 2027, and continue to fulfill Amazon’s massive order for 100,000 electric delivery vans through 2030. It also plans to start selling some of these delivery trucks to other customers over the next few years.
To support its expansion plans, Rivian recently applied for a federal loan, seeking funds to resume construction of a new $5 billion factory in Georgia that could eventually triple its annual production capacity. This roadmap looks promising, but Rivian still needs to solve its latest supply chain bottlenecks and prove it can scale its business.
Unfortunately, Rivian insiders have sold roughly 86 times as many shares as they bought over the last three months, so it may take a long time for it to stabilize its shaky business and convince the market that it deserves a higher valuation. On the bright side, Amazon still maintains its stake in Rivian and remains its largest investor.
Can Rivian stock qualify you for life?
Rivian’s low price-to-sales ratio could make it a tempting turn for value-seeking investors. If only it could expand its business in the same way Tesla As it has done over the past decade, your stock could be a millionaire maker from here. However, Tesla had the advantage of early leadership in electric vehicles, helped by more generous government subsidies, and did not face much direct competition during its expansion phase. It’s too early to assume that Rivian can repeat Tesla’s growth trajectory.
But with Rivian shares trading at these prices, downside risk for new investors may be limited — and it could be a worthwhile investment for aggressive speculative investors looking for long-term gains. Rivian certainly has the potential to turn a modest investment into a major asset, but its stock could also easily be cut in half again (or worse) if the company can’t meaningfully ramp up electric vehicle production.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Liu Sun He has jobs at Amazon. The Motley Fool has positions in and recommends Amazon, Tesla, and Volkswagen. The Motley Fool recommends General Motors and Volkswagen Ag and recommends the following options: Long January 2025 $25 calls on General Motors. The Motley Fool has Disclosure policy.
Can Buying Rivian Automotive Stock Today Set You Up for Life? Originally published by The Motley Fool