Rivian Automotive (RIVN) had a meteoric rise post its 2021 IPO, only to witness a staggering 93% drop from its peak, leaving its market cap at $10.9 billion. Now, the burning question looms large – can Rivian’s stock sail back to glory by 2024, and if so, how high can it ascend?
Delving into Rivian Automotive
Rivian Automotive (RIVN) specializes in designing, developing, manufacturing, and retailing electric vehicles (EVs) and related accessories. Its lineup includes the R1T, a two-row, five-passenger pickup truck, and the R1S, a three-row, seven-passenger sports utility vehicle.
The premium R1T electric pickup, priced around $100,000, has been able to drum up steady demand, while the company’s best-seller, the R1S SUV, comes with a $70,000 price tag. Rivian also caters to the commercial sector, with a significant deal in place with Amazon (AMZN) to deliver 100,000 vehicles by 2030.
Looking forward, Rivian aims to expand its product range, focusing on launching more affordable vehicles. Its recent announcement of the R2 SUV, priced at $45,000 and slated for production in the next couple of years, signals its commitment to diversifying its offerings.
The Thorn in Rivian’s Side: Cash Burn Concerns
An unsettling trend has emerged in the last year, with the EV landscape grappling with dampened consumer interest amidst inflation and climbing interest rates. Rivian’s Q4 2023 saw a dip in vehicle deliveries to 14,000 from 15,500 in Q3, hinting that the thirst for high-end EVs might have peaked.
Moreover, a steep cash burn of $6 billion in the last year has left Rivian with $9 billion in cash reserves by the end of 2024. With an annual outflow of $6 billion, the clock is ticking for Rivian, with only 18 months of financial runway remaining. To stay afloat, the company will likely need to seek fresh equity, potentially diluting shareholder value and exerting downward pressure on its stock prices.
Optimism in the Air: Piper Sandler’s Rosy Outlook
In a surprising turn of events, Piper Sandler recently upped its rating on Rivian from “hold” to “buy,” accompanied by a target price boost from $15 to $21 per share. The raise signifies a potential 100% surge from current levels as per the brokerage’s estimates.
Piper Sandler is banking on Rivian’s upcoming mid-sized SUV, priced at $40,000, to witness heightened demand in the latter half of the decade. The bank elucidated that Rivian’s decision to produce the lower-priced SUV at its Illinois facility instead of the planned Georgia site could lead to cost savings exceeding $2 billion.
Setting a Course: Price Projections for RIVN Stock
Market analysts foresee Rivian’s sales inching up by 8.8% YoY to $4.82 billion in 2024, with a projected surge of 56% to $7.5 billion in 2025. While the stock may appear attractively priced at under three times its 2024 sales, its lack of profitability entails continued risk for investors.
Of the 24 analysts covering RIVN, 13 advocate a “strong buy,” two a “moderate buy,” seven a “hold,” and two a “strong sell.” The mean target price for RIVN stands at $19.30, marking a 78% leap from the previous week’s closure.
