The EV maker’s stock price has fallen to nearly 90% below its public offering price.
Rivian Automotive (RIVN -0.79%) attracted a crowd of bulls with its November 9, 2021 IPO. The electric vehicle (EV) maker went public at $78 per share, with shares opening at $106.75 before hitting an all-time high of $172.01. Exactly one week later.
At its peak, Rivian’s market capitalization reached $153 billion, 92 times the revenue the company would generate in 2022. That temporarily made the small EV maker more valuable than Ford or General Motors.
Image source: Rivian.
Rivian’s stock price initially soared for three reasons. It was backed by Amazon and Ford, it had already produced thousands of EVs, and it went public at the height of the meme stock boom. But Rivian stock currently trades at about $10, and has a much lower market cap of $10 billion. This is less than double the revenue expected to be generated next year.
Bulls fled as Rivian’s growth slowed, it racked up deep losses and rising interest rates eroded its strong valuation. Ford also abandoned plans to jointly develop an electric pickup truck with Rivian in 2021 and liquidated most of its stake in the company in 2022. But with the market now shunning Rivian, could acquiring Rivian offer significant future returns?
Why did Rivian disappoint investors?
Rivian currently produces three vehicle models: the R1T pickup, R1S SUV, and a custom delivery van for sale on Amazon. Prior to its public launch, Rivian claimed it would produce 50,000 vehicles in 2022, but in reality it produced 24,337 vehicles and delivered only 20,332. The company blamed these disappointing numbers on supply chain constraints, slowing growth in the EV market, and other industry-wide macro headwinds.
In 2023, Rivian overcame these challenges, producing 57,232 EVs and delivering 50,122. The company’s growth accelerated as it resolved supply chain issues and ramped up in-house enduro drive unit production to reduce costs.
However, Rivian expects to produce only 47,000 to 49,000 vehicles in 2024. The company again blamed supply chain problems, which were exacerbated by the suspension of its flagship plant in Illinois in April for equipment upgrades, fierce competition in the electric vehicle sector, and rising interest rates. Full-year deliveries are expected to be between 50,500 and 52,000 units.
Will Rivian finally be able to expand its business?
Rivian’s 2023 sales rose 167% to $4.43 billion, but its net loss narrowed only slightly, from $6.75 billion to $5.43 billion. Analysts expect sales to rise only 6% to $4.71 billion in 2024, but expect net losses to narrow to $4.88 billion. Although these losses are significant, Rivian still had a total of $9.18 billion (including cash, cash equivalents and short-term investments) on its books at the end of June.
Volkswagen also launched a new joint venture with Rivian in June to co-develop new EV architecture and software. As part of the deal, the German automaker plans to invest up to $5 billion in the joint venture with Rivian over the next two years. The new funding will help Rivian launch a new, cheaper SUV, the R2, in 2026, launch higher-end R3 and R3X SUVs in 2026 and 2027, and launch Amazon’s 10 That should provide headroom to continue fulfilling a large order of 10,000 electric delivery vans. The company also plans to start selling some of these delivery vans to other customers in the next few years.
To support its expansion plans, Rivian recently applied for a federal loan to help restart construction on a new $5 billion Georgia factory that could ultimately triple its annual production capacity. While this roadmap looks promising, Rivian still needs to solve modern supply chain bottlenecks and prove it can scale its business.
Unfortunately, Rivian insiders have sold nearly 86 times as much stock as they bought in the past three months, so it’s been a while since Rivian insiders have stabilized their shaky business and convinced the market they deserve a higher valuation. It may take a long time. On the bright side, Amazon still owns a stake in Rivian and remains its top investor.
Will Rivian stock pay you for life?
Rivian’s low price-to-sales ratio could make it an attractive turnaround strategy for value-seeking investors. If Tesla can expand its business the same way it has done over the past decade, it could become a billionaire manufacturer’s stock from here. But Tesla established a first-mover advantage in the EV space, was supported by more generous government subsidies, and faced less direct competition during its expansion. It’s premature to think Rivian can replicate Tesla’s growth trajectory.
However, with Rivian stock trading at these prices, the downside risk for new investors may be limited, making it valuable for aggressive speculative investors looking for long-term returns. It could be an investment. Rivian certainly has the potential to turn a modest investment into a major asset, but the stock could easily halve again (or worse) if it can’t meaningfully increase EV production. There is also.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Leo Sun has a position 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-term January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
