Rivian (RIVN 6.10%) was the first company to launch an electric pickup truck, but that space is quickly becoming more crowded. With the Ford F-150 Lightning and now the Tesla Cybertruck available, Rivian isn't the only kid on the block.
Still, it's an exciting investment because it's a young and growing company with a great product. But could it be the best EV stock for 2024? Let's find out.
Rivian's product figures have steadily risen
Rivian's lineup currently consists of two vehicles: the R1T (T for truck) and the R1S (S for SUV). It also owns the contract to make Amazon's electric delivery vans. However, it plans on launching an R2 model in 2026 that is slated to be more economical. Rivian's vehicles aren't the cheapest EV options, so having a cheaper model that's more attractive to the masses will be key for expanding.
Still, Rivian has been expanding at a healthy rate. In Q3, it produced 16,304 vehicles, its best quarter ever. It also raised its 2023 production guidance number to 54,000, up from the 52,000 figure it updated investors on in Q2. So Rivian isn't just executing; it's also getting better.
This is great news, as Rivian is racing against the clock to turn a profit.
Every vehicle Rivian makes, it loses more money
Despite generating $1.34 billion in revenue in Q3, it cost $1.81 billion to generate that revenue. That means Rivian isn't just unprofitable from an operational standpoint; it's losing money from a production standpoint. Believe it or not, that's a massive improvement over the past year.
| Quarter | Revenue | Gross Profit | Gross Margin |
|---|---|---|---|
| Q3 2022 | $0.536 billion | ($0.917 billion) | (171%) |
| Q4 2022 | $0.663 billion | ($1.000 billion) | (151%) |
| Q1 2023 | $0.661 billion | ($0.535 billion) | (81%) |
| Q2 2023 | $1.121 billion | ($0.412 billion) | (37%) |
| Q3 2023 | $1.337 billion | ($0.477 billion) | (36%) |
Data source: Rivian.
So, while Rivian has made significant improvements, it's still a ways away from generating any profit on the vehicles it produces, and that doesn't include any operational expenses. If you include those, Rivian lost $1.44 billion in Q3. Few companies can sustain that level of cash burn for an extended period. With about $9 billion in cash and equivalents on its balance sheet, Rivian will need to continue progressing toward profitability or risk needing to raise more capital.
Rivian did that once in 2023, but it didn't go well. It raised $1.5 billion through a convertible debt offering, which caused the stock to plummet nearly 25% to offset the dilution that the increased share count caused.
If Rivian has to return to the public market to raise more money, investors shouldn't be surprised if there is a similar response.
But even if Rivian succeeds, is there more room for the stock to run?
Rivian stock is already valued at a premium
At its current levels, Rivian has a market cap of about $18 billion, about half the size of legacy automaker Ford at $44 billion. It's well documented that the legacy automakers trade at dirt cheap valuations, while Tesla trades at a much higher premium.
While Rivian is unprofitable, if we assigned Tesla's profit margins to Rivian (11% over the past 12 months), Rivian would be producing about $416 million in profits. That would value Rivian stock at around 44 times earnings if it achieves Tesla's profit levels. While that's cheaper than Tesla's 77 times earnings, it's still far more expensive than Ford's 7.3 times.
However, Rivian is a ways away from getting to this profitability level. With its current margins, it may not even make it there. As a result, I think Rivian is still a risky investment, as it's already expensive.
Even if Rivian can reach full production levels and break even, it's already expensively valued. As a result, I don't think Rivian will be 2024's top EV stock.
