Rivian Automotive (RIVN +2.01%) was one of the market's hottest stocks when it went public in November of 2021. Its stock more than doubled from its initial public offering (IPO) of $78 to its all-time high of $172.01 just a week later. At the time, investors were impressed by its production rates and its firm support from Amazon and Ford Motor.
But as of this writing, Rivian's stock trades at about $10. It lost its luster as it missed its own production targets and racked up steep losses. Ford subsequently liquidated its stake in Rivian, and rising interest rates compressed its valuations. That sounds grim, but could the stock at least stabilize and double over the next five years?
Rivian's R1S SUV. Image source: Rivian.
Why did investors give up on Rivian?
Rivian produces electric pickups, SUVs, and custom electric delivery vans for Amazon. At the time of its IPO, it claimed it could produce 50,000 vehicles in 2022. But it eventually reined in that forecast and only produced 24,337 for the full year. It mainly blamed that slowdown on supply chain constraints and other macro headwinds.
The company overcame most of those issues and produced 57,232 vehicles in 2023. The production of its in-house Enduro drive unit, which reduced its production costs and its dependence on third-party components, accelerated its recovery.
In 2023, Rivian generated $4.4 billion in revenue as it delivered 50,122 vehicles. However, it only slightly narrowed its operating loss from $6.8 billion to $5.7 billion.
NASDAQ: RIVN
Key Data Points
But in 2024, Rivian expects to only manufacture about 57,000 vehicles as it grapples with tougher macro headwinds, fierce competition, and the temporary shutdown of its main plant in Illinois for several weeks to streamline its production capabilities. It also continues to prune its workforce to rein in operating expenses.
Analysts expect Rivian's revenue to only rise 8% to $4.8 billion this year as it narrows its operating loss to $4.8 billion. It won't go bankrupt anytime soon (it still had $10.5 billion in total liquidity at the end of 2023), but its slowing growth and persistent losses make it a tough stock to recommend as long as interest rates remain elevated.
Where will Rivian's stock be in five years?
Rivian currently sells the R1T pickup, R1S SUV, and Amazon's electric delivery vans. But that lineup will expand over the next few years. In 2026, it plans to launch its cheaper R2 SUV. In late 2026 to early 2027, it will roll out its sportier R3 and R3X SUVs. It will also continue to fulfill Amazon's orders for 100,000 vans through 2030.
The company continues to open new "spaces" (as it calls its showrooms) across the U.S. to display its EVs. It also recently made its vehicles compatible with Tesla's Superchargers across North America via special adapters. Starting in 2025, its vehicles will be natively compatible with the Superchargers without additional adapters. That cross-compatibility should make Rivian's vehicles more appealing to buyers.
Assuming Rivian stabilizes its business, successfully launches its new vehicles without more hiccups, and gradually expands its market share, analysts expect its revenue to achieve a compound annual growth rate (CAGR) of 39% from 2023 to 2026. That's a high rate for a stock that trades at just two times this year's sales.
If the company matches analysts' estimates for 2026 and still trades at two times sales, its market cap would reach $24 billion. That would be more than double its current market cap of $10.5 billion. If it trades at a more generous six times sales, which would be comparable to Tesla's forward price-to-sales ratio, its market capitalization would rise nearly sevenfold to $72 billion.
Should it match those estimates and grow its revenue at a CAGR of 20% from 2026 to 2029, it would generate nearly $21 billion in revenue by the final year. It would only need to be trading at one time sales to double its stock from its current price. And at five times sales, it would be worth $105 billion, representing a ten-bagger gain over the next five years.
Rivian could easily return to its IPO price
Unlike Ford, Amazon hasn't sold its stake in Rivian yet. That's probably because Amazon realizes that its stock is undervalued right now, and it could have a lot more upside as it ramps up its production and stabilizes its spending.
Therefore, I believe Rivian should more than double over the next five years. But its stock should remain volatile in this choppy market -- and it could easily be cut in half before it doubles, triples, or rallies back to its IPO price.
