This article explores the high-cost base, aggressive cash burn, and waiting to become profitable of Rivian. We also discuss the stock’s high valuation. So, how will Rivian look in 2025? Will it still be in the public markets? Or will it look a lot different?
Rivian’s high-cost base
According to a recent report from Barclays Capital, Rivian’s stock price could rise to $108 by 2025. The analysts believe that the company has enough unique characteristics to differentiate itself from its competitors in the electric vehicle market and the ICE market. This adventurous quality is similar to the one that makes Jeep command premium prices in the ICE market. The analyst believes that the adventurous quality of Rivian’s vehicles will drive subscription and recurring revenue opportunities.
Rivian’s main business is selling electric vehicles. This means that its stock price will increase as the company makes more sales. However, there are also many competitors who are trying to get a piece of the EV market. These competitors include Tesla, Nio, and Lucid Motors. Meanwhile, traditional automakers like GM and Ford are also getting into the electric car market.
The company recently posted earnings for the first quarter of 2022. Although its production targets remain unchanged, Rivian has a solid chance of capturing a good share of the market. As of June 30, the company had received 98,000 pre-orders for the R1 pickup truck, and an additional 100,000 for electric vans. As of 31 March, the company has $17 billion in cash. Q1 2022 revenue was $1.6 billion. The company expects to sell around 25,000 vehicles by the end of 2022.
The company’s ramp-up continues, but analysts do not expect it to hit the $180 high set during the IPO. In addition, the latest pricing mishap could result in a lower than-expected customer delivery volume. Pre-orders may be cancelled or adjusted, and price-sensitive customers may choose to purchase less expensive alternatives.
Rivian’s high-cost base will likely limit the stock price. However, the company’s stock price could reach $170 in 2025 if it can reduce its high-cost base. The company’s CEO has also stated that the company’s costs will decline significantly once deliveries begin.
Rivian’s stock is now publicly traded on the NYSE under the ticker code RIVN. The company has a market cap that is larger than Ford and GM. However, its market cap is still so high that it may be due for a correction. Shah cautions investors against overvaluing Rivian stock.
Its aggressive cash burn
Rivian Automotive (RIVN) is a major player in the electric vehicle industry. The company’s stock is expected to increase by nearly 30% in the next decade. In fact, some analysts are predicting a jump as high as $170 by 2025. Other analysts expect the stock to rise a little more slowly, to around $94.
In order to meet this target, the company has been aggressively burning cash. Its first-quarter operating expenses were $1 billion, more than double what they were last year. The company will report its second-quarter earnings on July 29. Its production goal is 25,000 electric cars in 2022.
As production issues continue, the company may have to close. However, it could also be bought out by another automobile company. In that case, investors would receive some of their money back, as well as shares in the newly merged company. If this scenario occurs, it is possible for Rivian’s stock price to continue growing beyond $1500.
Rivian’s aggressive cash burn is part of the reason why its stock price has fallen dramatically. However, it still has plenty of cash to operate for at least three years. It also has a growing order backlog and a factory to build the vehicles. If it can manage to achieve its targets, its stock price prediction 2025 could be right.
While the company’s production ramp continues to improve, it is unlikely to return to the previous levels set during its IPO. Its latest pricing blunder may mean lower customer delivery volumes than anticipated. Rivian has also cancelled existing pre-orders or adjusted pre-order prices, which may sway price-sensitive customers to choose other, cheaper options.
The latest mishaps for Rivian have pulled it further away from its glory days. During its November IPO, its market cap hit an all-time high of $179. However, in mid-November, the company’s stock briefly touched $150 billion. After the initial run, the company’s stock price was hit hard by the outbreak of the Omicron coronavirus, which renewed concerns about global economic recovery. Nevertheless, the company’s stock continues to decline slowly and steadily.
The stock has potential to hit the $100 mark again, but it won’t happen anytime soon. In fact, it will take at least four or six quarters before investor confidence builds in Rivian. In the meantime, the company needs to ramp up production, ramp up delivery and increase reservation volume. These are the key catalysts for a rebound in the stock.
Its wait for profitability
Rivian isn’t expected to become profitable this year. The company is using net proceeds from its initial public offering for working capital, growth, and general corporate purposes. Rivian has been grappling with supply-chain issues, and some of its production capacity isn’t up to speed.
Rivian has warned investors that it will continue to lose money while it ramps up its production capacity. While it has improved its financial statements over the last few months, it still expects to run at a loss for the foreseeable future. Although inflation has slowed, material costs remain high. This makes ramping up EV production expensive, and Rivian is not yet profitable.
Rivian’s stock has been under pressure since its IPO last year. Although it debuted on the public market with an overall valuation of over $80 billion, its stock price has fallen significantly since then. That’s because the company has struggled with supply chain and manufacturing woes, which make it difficult to secure components such as lithium-ion batteries and semiconductor chips.
Despite the recent setback, Rivian’s production volume is still rising. In the second quarter, the company reported $364 million in revenue. It is aiming to build 25,000 vehicles this year. It is currently producing the R1T pickup truck, the R1S SUV, and EDV commercial electric vans for Amazon. But the company faces the same pressures as any other company in the automotive industry. In July, it laid off 900 workers, about 6% of its workforce.
In addition to cutting production costs, Rivian is focusing on bringing more affordable models to market. But that means that demand contraction is a risk. It is hard to know how long it will take before the company is profitable, but it has two main goals in mind. These goals are not easily achieved without a significant amount of cash.
The short term looks unattractive, especially with lithium prices rising fivefold in recent months. Rivian’s production problems have also influenced pricing decisions across the industry. Tesla recently increased the entry-level price for electric vehicles every month until 2021. Its stock price hasn’t recovered from a 20% plunge after the pricing U-turn.
Its high valuation
Rivian is an American automaker that develops electric vehicles. Rivian has already developed an electric pickup truck and sport utility vehicle, and it is currently developing a platform that will support future vehicles. This platform can be used by other companies to build their own electric vehicles. The company’s high valuation is reflective of its rapid growth and potential to make a big impact on the auto industry.
The company is set to make significant progress next year. Its IPO has left it flush with cash, and it is backed by Ford and Amazon, who each own stakes in the company worth billions. Ford has also placed an order for at least 100,000 electric vehicles by 2030. Although Rivian has only a few R1Ts on the market, it is poised to grow and expand.
Rivian’s IPO rode on the recent euphoria in the EV sector. Lucid Motors’ recent announcement of a partnership with Tesla, as well as solid earnings, helped the EV market. As a result, Rivian’s IPO was more successful than analysts had anticipated. Its stock soared 70% in its first four trading days. However, the stock has already retraced 25% since Tuesday.
Rivian’s valuation is significantly higher than that of General Motors (GM -3.52%) and Ford Motor Company (F -2.35%). While Rivian has yet to book any revenue from sales, its $10 billion IPO is indicative of its impressive line-up of investors. Its prospects to become a leader in the EV market in the next few years make it a compelling investment. However, the company’s current valuation is too high to be rational.
Rivian must prove that it can scale up production and deliver a significant number of EVs. It faces significant competition from Tesla Motors and other traditional automakers, including General Motors, Ford, and Stellantis. Rivian also has to overcome a chip shortage that is causing its losses to rise.
Rivian Automotive Inc. has now gone public on the Nasdaq and has a market value of over $100 billion. This is already twice the market cap of GM and Ford Motor Co. It is also the second most valuable automaker in the United States after Tesla. The company’s IPO was the biggest of the year. The company’s valuation is also the third-highest in US history, behind Facebook’s $15 billion IPO in 2012.