Rivian stock price forecast: Fortune favours the brave

Rivian (NASDAQ: RIVN) stock price is still hovering near its lowest level on record as investors remain concerned about profitability, cash flows, and competition in the industry. The shares have underperformed the broader market and Tesla whose stock has jumped by over 1075 this year.

Progress amidst challenges

Rivian share price has plunged by over 90% from its all-time high, making it one of the worst-performing companies in the Nasdaq. The biggest concern among investors is that the company is burning cash, which could see it dilute shareholders in the near term. In 2022, the company lost over $6.8 billion.

Its cash balances dropped from over $18 billion to over $11.5 billion in 2022. In the most recent quarter, the company said that its cash balances stood at $11 billion. As such, since Rivian has a market cap of about $12.98 billion, the market is assigning minimal value to its broader market.

Rivian’s cash balances will continue falling unless the company raises more capital. The most recent results showed that the company’s net loss dropped to $1.34 billion from the $1.58 billion it lost in the same quarter in 2022. Ruvian believes that its current cash will last until 2026 when it will launch its R2 truck.

Despite these challenges, Rivian seems like a good speculative buy. For one, the company’s growth is undeniable. It produced over 24,300 vehicles in 2022 and the company is sticking to its 2023 target of 50,000 vehicles. I believe that this estimate is highly ambitious considering it manufactured over 9,395 vehicles in Q1. This means that it needs to make about 13.5k vehicles per quarter. 

Still, even if it manufactures 9,395 vehicles per quarter, its total vehicles for the year will be almost 38,000, much higher than what it sold in 2022. This is despite the fact that Rivian’s cars are much expensive than Ford Lightning.

The case for Rivian

Rivian faces numerous challenges ahead. The most important challenge is competition, especially with Ford Lightning. To some extent, there is no big difference between the two trucks since they have a similar range and towing capacity, Lightning has a higher payload and is about $12,000 cheaper than Rivian R1t. As such, I suspect that more people will still buy Lightning as evidenced by its 200k order backlog.

Still, a case for Rivian as an investment can be made. The company has created a product that people seem to love and is making progress to narrow its losses. Estimates are that its loss per share will be $5.26 this year and drop in the next few years. 

To be sure, 2028 is still far away and the company could still dilute its shareholders during this time. But I believe that the company is doing well to narrow its losses. In othr words, I agree with what Barclays analysts wrote when they said that the company’s biggest problems were behind it. In a separate report, analysts at Bank of America said:

“We reiterate our Buy rating on RIVN, which is predicated on our view that the company is one of the most viable among the start-up EV automakers and also a relative competitive threat to incumbent OEMs. While we acknowledge the competitive landscape for EVs is fierce, we believe RIVN has more pieces in place and in progress than most EV OEM peers.”

Therefore, I have started to buy Rivian shares for my speculative portfolio. It has an attractive value proposition, is making strong growth, and management is reducing costs. Further, the company is in the SUV and pick-up trucks industry that is booming in the US. Like Tesla, it has more room for international expansion. I do this while acknowledging that the company faces significant risks ahead.