Investor looking at the EV space may wonder is Rivian (RIVN 📈) a good stock to buy. After all, its stock price has fallen from a high of $179 to now $12. In this article, we look at the company’s fundamentals and business prospects to answer the question whether Rivian is a bargain and good stock to buy at this level. Furthermore, we will evaluate whether the company can become a dominant force in the electric vehicles space.
Why did RIVN’s share price drop by 92%? Is Rivian now a good stock to buy?
As recently as in 2022, Rivian was valued at $165bn. By comparison, General Motors (GM 📈) is valued at $53bn today.  Rivian is valued at $11.6bn. On a side note, give such massive value destruction in less than two years, one can’t help but wonder how efficient the market really are.
Zooming in on Rivian, what can explain this 92% drop in share price? Here’s our list of potential explanations:
1. Rivian was completely overvalued in the first place when it reached a market capitalization of $165bn on just $1.7bn in revenue.
2. The market eventually realized that Rivian is facing extensive operational challenges in scaling production and maintaining operational efficiency.
3. Since the order by Amazon, Rivian has not announced any major order suggesting a decline in demand for its vehicles.
Business and main products
Rivian designs, manufactures, and sells electric vehicles and accessories. The company’s lineup includes five-passenger pickup trucks and sports utility vehicles. Rivian is also known for its commercial vehicle platform, comprising electric delivery vans, in collaboration with Amazon.com. The company sells its products directly to customers in the consumer and commercial markets. Rivian was founded in 2009 and is based in San Jose, California.
Amazon order
Rivian is best known for having received an order for 100,000 electric vehicles by Amazon, with the goal of having all 100,000 vehicles on the road by 2030. This order was part of Amazon’s commitment to achieve net-zero carbon emissions by 2040 under The Climate Pledge. The order was first announced in September 2019. Five years in, Amazon has reportedly deployed over 13,500 Rivian electric delivery vans across the United States.
Difficulty to scale production
Rivian’s efforts to ramp up production have run into significant operational challenges. Although production and delivery figures have improved, the company’s ability to scale efficiently and achieve profitability remains a concern.
As the following chart illustrates, vehicle deliveries are growing in a linear fashion going on 60,000 vehicles in 2024. However, from this low base, one would expect exponential growth as economies of scale kick in. This is not the case. By comparison, Ford expects to sell as many F-150 Lightnings alone. Tesla is forecast to deliver 2 million vehicles this year.
Falling demand and sales
Having failed to scale at a faster rate, Rivian is now facing stiff competition from several directions.
Chinese players, such as BYD, NIO and Xpeng are gaining momentum fast. The cars built by these companies increasingly manage to meet Western consumers’ high standards.
In the US, both GM and Ford now have competing trucks in their product lineup. Ford’s famous F-150 is enjoying a great deal of success.
Demand for Rivian’s trucks is also hampered by its high prices. The R1T and R1S start at $71,000 and $ 76,000 respectively. By comparison, Ford’s F-150 Lightning starts just $55,000. The price difference of 22% is substantial and already factors in significant price cuts on Rivian’s main models, both on the vehicle itself and built-in batteries.
Revenue is stalling in 2024
In light of the acute pricing pressure, it does not come as a surprise that Rivian’s revenue is stalling, at best. After peaking in Q3 2023, Rivian has already experienced two consecutive quarters of falling revenues. Analysts project that 2024 revenue may actually fall slightly by 2% to $4.7B. For the year 2025, analysts are more optimistic projecting a 40% rebound in annual revenue to $6.5B.
Improvements in operational efficiency
On its quest for profitability, Rivian has implemented several operational improvements. The company notably launched an extensive cost reduction initiative focused on reducing material costs and improving manufacturing efficiencies. This includes the introduction of new manufacturing technologies and processes to streamline production.
Rivian is also actively pursuing strategic partnerships. The most notable one is its collaboration Amazon, whose 100,000 vehicle order nicely filled up Rivian’s order books for a while.
The quest to reach profitability
Notwithstanding these measures, analysts don’t expect the company to break even anytime soon. They project both a net loss and negative cashflow all the way through 2026. At this rate, the company’s equity will be gone in 2026 so that the company will have to raise capital at some point this year or next. The longer Rivian waits, the less certain a the outcome of a capital raise will become.
Rivian’s valuation
At this stage, a proper valuation of Rivian borders on guesswork. Conventional earnings-based valuation methods do not apply. With a Price to Sales ratio of 2.2x, the market values Rivian at a significant multiple compared to GM or Ford, which trade at a multiple of just 0.6x. This premium seems excessive in light of the uncertainties faced by Rivian.
These uncertainties are driven by existential questions for Rivian. Will Rivian be able to pull another huge order for its commercial vehicle fleet? Will it become a major beneficiary of the US protectionist stance against China? Will the company manage to raise capital?
In our view, the actual, still elevated valuation level may loosely price in a takeover bid, as there is no justification for a valuation premium relative to profit-making, longstanding carmakers, such as GM and Ford.
Our bottom-line: Is Rivian a good stock to buy?
In our view, Rivian currently has but one thing going for it: market leading growth prospects. But is that sufficient to positively answer the question is Rivian a good stock to buy? We don’t think so.
Sure, in 2025, with a forecast of 40%, Rivian is projected to put up one of the highest relative revenue growth rates in the entire automotive industry. But that growth rests on a very precarious foundation.
Management has yet to show that it can generate an acceleration in its production capacity. This is especially critical given that the market expects a 40% jump in revenue in 2025.
Finally, Rivian’s ability to execute on its business plan hinges a great deal on securing fresh capital. If net losses continue as projected, the company will need fresh capital by no later than year-end 2025.
Based on the information reviewed for this post, we conclude that Rivian is currently not a good stock to buy for long-term investors seeking to build wealth in a sustainable fashion.
Important notice:
This article is not to be understood as a recommendation to buy or sell. Please conduct your own research before making investment decisions. To this end, we aim to provide you with the best portfolio management tool and investment research data possible. However, we cannot guarantee the accuracy of this information in spite of our extensive efforts to ensure that the data is complete and 100% accurate.
