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Shares of electric vehicle company Rivian (RIVN) have burned significant investor wealth since the company's IPO in 2021. At its peak, Rivian was valued at more than $100 billion by market cap; now, it's worth $18.36 billion, and the stock currently trades 89% below all-time highs.
However, the electric vehicle (EV) market continues to expand at a rapid pace, and many on Wall Street still deem Rivian stock a top investment choice. So, after the stock's big drop last week, let’s see where analysts think Rivian shares might be in one year.
Is Rivian Stock a Good Buy Right Now?
Rivian designs, develops, manufactures, and sells electric vehicles and accessories. It currently offers five-passenger pickup trucks and seven-passenger sports utility vehicles.
Last Thursday, Oct. 5, RIVN shares cratered more than 22% in a single session after the company guided for third-quarter sales of $1.31 billion, short of consensus forecasts for $1.38 billion. Additionally, the EV specialist said it will issue $1.5 million in convertible notes to raise cash.
To put this news in context, Rivian manufactured 24,337 vehicles in 2022, which was below its guidance of 25,000 vehicles. In the first six months of 2023, it has produced 23,387 vehicles, and plans to end the year with a total production of 52,000 vehicles - above its earlier forecast of 50,000. The company also disclosed it manufactured 16,304 vehicles in Q3, bringing its total vehicle production in 2023 to 39,691 vehicles.
This expansion in production rates should allow Rivian to improve profit margins and benefit from economies of scale over time. Moreover, Rivian is positioned to take advantage of a vertically integrated supply chain as it lowers dependency on third-party suppliers for vehicle components. The company’s gross margin has already narrowed to negative 37% in Q2 of 2023 from negative 193% in the year-ago period.
Rivian is also manufacturing its own chips and building a proprietary operating system, shielding itself from disruptions in the global supply chain while providing it with a competitive moat.
Rivian ended Q2 with $5.5 billion in total liabilities and $10.2 billion in cash. In the last 12 months, its liabilities have risen by 60% while its cash balance has reduced by 34%. The company expects to end Q3 with $9.1 billion in cash.
That said, Rivian is part of a capital-intensive industry, and will have to expand its manufacturing capabilities significantly before it reports consistent profits each quarter. Additionally, a market expanding at a steady pace attracts competitors. So, Rivian will have to wrestle for market share with EV leaders such as Tesla (TSLA) and Nio (NIO), as well as with legacy auto manufacturers including Ford (F), Volkswagen (VWAGY), and Toyota (TM).
What Is the Target Price for Rivian Stock?
Rivian is forecast to increase revenue from $1.66 billion in 2022 to $4.36 billion by 2023, and $6.9 billion in 2024. Comparatively, its losses per share are forecast to narrow from $6.34 in 2022 to $3.31 by 2024. Priced at 2.6 times forward sales, RIVN is reasonably valued at current levels, given its growth forecasts.
Following Rivian’s latest capital-raising effort, analyst Dan Ives at Wedbush cut his price target on the stock by 22% to $25, while reiterating an “outperform” rating. “We are lowering our price target from $32 to $25 reflecting a lower multiple as the risk profile for Rivian has been elevated in our view with a key ‘prove me’ period ahead,” wrote Ives in a note to clients.
Meanwhile, Needham analyst Chris Pierce just reiterated a “buy” rating on RIVN with a price target of $31, and said he believes Rivian offers an attractive risk-reward profile. According to Pierce, the company’s robust liquidity position and improving profit margins make it one of the top stocks in the EV sector.
Out of the 21 analysts covering RIVN, 10 recommend “strong buy,” three recommend “moderate buy” and eight recommend “hold.”
The average 12-month target price for Rivian stock is $28.86, which is 47% above the current trading price. Notably, RIVN's 2023 calendar year high stands at $28.06, and the $28 region on the charts was key support for RIVN before switching roles to act as a ceiling for the stock's July peak.
