Rivian Automotive Today
Rivian Automotive
(As of 12/27/2024 5:45 PM ET)
- 52 week range
- $8.26
▼
$24.30
- Target price
- $15.74
Shares of electric vehicle maker Rivian NASDAQ: RIVN In 2024, they experienced something of a roller coaster. After trading above $23 per share to start the year, they fell to under $9 per share by mid-April. By mid-July they were back above $18, before falling below $10 in November. Now the shares are rising again.
As of the close on December 26, Rivian shares had gained 34% over the past month. However, they are still down 41% year to date and are currently trading at just over $14. I’ll detail Rivian’s latest quarterly results and analyze its plan for success to understand the merits of the stock as a long-term investment.
Supply chain problems cause Rivian production to plummet
Looking at Rivian’s latest financial results, it’s not hard to see why the company’s stock price has fallen so much in 2024. They produce and deliver fewer cars. The company delivered just over 10,000 vehicles in the third quarter, the lowest since the second quarter of 2023. This is 36% less than in the third quarter of 2023. The number of vehicles produced was also down 19% compared to the same quarter in 2023. This was affected by serious supply chain issues. this.
While things aren’t going well right now, there are reasons why the Bulls believe Rivian can turn things around. It is these hopes that push stocks higher. The business of making and selling cars is typically not that profitable, and Rivian recognizes this. The normalized net profit margin for the last 12 months is -76%. Becoming a profitable company is undoubtedly the most important and challenging task facing Rivian. Rivian is working in several ways to achieve this goal.
Rivian’s Potential Path to Profitability
The company has established itself as a strong player in the EV software space. The company launched a $5.8 billion joint venture with one of the world’s largest automakers, Volkswagen. OTsMKTS: VVAGI. Volkswagen will invest up to $5.8 billion in Rivian and will use Rivian software in its future electric vehicles. Software is inherently a much more profitable business than car manufacturing. Rivian’s ability to generate revenue from licensing its software is one factor that could help the company grow profits in the long term.
However, if Rivian really wants to succeed, it will have to do so by significantly reducing the cost of producing cars. It seems to have made some progress. First, the company is forecasting positive gross margins for the fourth quarter. This is due to a projected 20% decline in material prices compared to the first quarter. In addition, the company also plans to sell a variety of regulatory loans. This strategy will also position the company to achieve positive gross margins in 2025.
In the long term, another profit driver will be cost reduction on future models. The company expects an additional 45% reduction in material costs for its R2 model, due in 2026. However, R2 may provide a limited increase in profits. Its selling price is projected to be just $45,000. New R1s currently sell for a minimum of $78,000. This price drop is about 42%, which is similar to the projected 45% drop in material costs. However, a lower price can attract many more buyers. This can significantly increase a company’s economies of scale, helping improve profitability and drive growth.
Q4 May Reveal Critical Answers Around Rivian
Rivian Automotive stock forecast today
$15.74
Growth potential 15.30%Hold
Based on ratings from 25 analysts
| High forecast | $28.00 |
|---|---|
| Average forecast | $15.74 |
| Low forecast | US$11.00 |
Rivian Automotive Stock Forecast Details
Overall, Rivian is a company that has significant opportunity, but also faces significant risks. The partnership with Volkswagen really inspires confidence and gives the company significant cash flow that it can use as a runway. However, the company has not shown much consistency in improving profitability. Throughout its history, the company has also faced supply chain and manufacturing challenges. This reduces confidence in management’s ability to get the job done.
Additionally, the company’s sales are falling as the overall EV market grows. The U.S. electric vehicle market grew a solid 11% in the third quarter to record size. Next quarter’s results will be a strong indicator of Rivian’s future. If production and sales recover while delivering on its promise of positive gross margins, it would be a step in the right direction. However, the plan to achieve profitability in the long term is still in question. For me, Rivian falls into the “wait and see” category. Wall Street’s average price targets suggest 12% upside for Rivian shares.
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