When Rivian Automotive's (RIVN +2.63%) stock closed at its all-time high of $172.01 in November 2021, the electric vehicle (EV) maker was worth $153 billion -- making it more valuable than Ford and General Motors. Yet that market cap was also unsustainable, since it valued Rivian at 85 times the sales it was expected to generate in 2022.
Today, Rivian trades at about $16 per share with a market cap of $14.5 billion -- which is less than 3 times its projected revenue for 2023. Its stock plunged as investors fretted over its cooling growth, supply chain challenges, and persistent losses. But could its business stabilize over the long term and become a trillion-dollar company by 2030?
Image source: Rivian.
Rivian's path toward the 12-zero club
Rivian manufactures three types of EVs: The R1T pickup truck, the R1S SUV, and an electric delivery van (EDV) for its top investor Amazon. It manufactured 24,337 vehicles in 2022, missing its own target of 25,000 vehicles as it struggled with various supply chain constraints.
Despite those challenges, Rivian management believes the company can produce a million vehicles a year by 2030. That would represent a whopping eight-year compound annual growth rate (CAGR) of 59% (when starting from 2022). At that same CAGR, Rivian's revenue would increase from $1.8 billion in 2022 to nearly $75 billion in 2030. If Rivian trades at 14 times sales by then, it could top the $1 trillion mark and deliver a near-70-bagger return for its current investors.
That would be similar to what happened to Tesla (TSLA +7.57%), which surpassed the $1 trillion mark in October 2021. On that fateful day, Tesla was valued at 12 times the sales it was expected to generate in 2022. However, Tesla's market cap has since shrunk to about $375 billion amid concerns about its slowing shipments, price cuts in China, and CEO Elon Musk's stock sales and polarizing behavior following his acquisition of Twitter last October.
NASDAQ: RIVN
Key Data Points
Can Rivian produce a million vehicles a year?
Producing a million vehicles per year would make Rivian comparable to the present-day Tesla, which produced 1.37 million vehicles in 2022. Rivian's Illinois plant currently has an annual production capacity of 150,000 vehicles, and it plans to increase its capacity to 200,000 vehicles this year. The opening of its second plant in Georgia in 2024 could boost its annual production capacity to approximately 600,000 vehicles.
That expansion could help Rivian fulfill Amazon's order for 100,000 EDVs, which it originally placed in 2019, by 2025 or 2026. It could also enable Rivian to fulfill its growing backlog of R1 preorders, which rose more than 60% year over year to 114,000 as of Nov. 7, 2022. That pent-up demand suggests Rivian still has a lot of pricing power.
Rivian is expected to launch its third R1 vehicle, the premium R1X SUV, in late 2023 for approximately $115,000. In 2026, it intends to roll out its second generation of R2 vehicles -- which will include its mid-size R2S SUV and rally-style R2R wagon -- followed by an upgraded version of the R2S in 2029.
It's all speculation at this point for Rivian
Rivian's long-term roadmap looks promising, but it's also expected to remain deeply unprofitable for the foreseeable future. In 2023, analysts expect it to generate $5.3 billion in revenue but rack up a net loss of $6.4 billion. In 2024, analysts expect it to generate $10.8 billion in revenue while incurring a slightly narrower net loss of $4.5 billion.
Rivian ended its latest quarter with $13.8 billion in cash, cash equivalents, and restricted cash, and its low debt-to-equity ratio of 0.2 gives it some room to raise fresh cash. But it will also continue to burn cash as it expands its plants and ramps up its production -- so investors shouldn't assume it will smoothly pump out a million vehicles per year by 2030. Its growth could still be derailed by a global recession, additional supply chain disruptions, and cutthroat competition from other EV makers.
Rivian has a shot at replicating Tesla's growth trajectory and joining the 12-zero club by 2030, but the chances are slim. In addition to flawlessly producing a million vehicles a year, Rivian would need to convince investors it deserves to trade at a double-digit price-to-sales ratio -- which could be difficult as its revenue growth gradually cools off in a crowded market.
