Is Rivian a good stock to buy?

Why did RIVN’s share price drop by 92%? Is Rivian now a good stock to buy?

Get the best auto stocks with free, cutting-edge fundamental stock research.

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

Amazon order

Difficulty to scale production

Rivian vehicle deliveries

Falling demand and sales

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.

Rivian revenue projection

Improvements in operational efficiency

Get the best auto stocks with free, cutting-edge fundamental stock research.

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 profitability forecast

Rivian’s valuation

Our bottom-line: Is Rivian a good stock to buy?

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.

Share this