Rivian Automotive’s (RIVN) electric SUV and pickup truck models look great, but its stock value isn’t as alluring. The company’s shares have been down 90% since its IPO in 2021. With internal mechanics spluttering and industry-wide challenges mounting, RIVN looks like a bit of a caterpillar for investors. Low demand, supply constraints, and ongoing cash burn have all undermined the company’s performance and shareholder outcomes.
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While some analysts are optimistic about substantial revenue growth in the next five years, hoping the stock will finally take flight as a beautiful butterfly for investors, RIVN’s most significant hurdle stands tall: finally reporting positive gross margins after years of fanciful promises and missed targets.
Rivian Automotive (RIVN) stock price history for the past 3 years
As Q4 earnings approach later this month, management hopes the quarter will be the first step toward profitability, with supply issues no longer a significant problem. While that could give Rivian’s stock a short-term boost, I struggle to see how the company can satisfy the market’s high expectations, which led to the stock being severely overvalued.
The market’s bullish outlook on RIVN stock depends on the company’s bounceback in 2025 after a tough 2024. Over the past year, Rivian’s stock has fallen 14%, thanks to industry-wide challenges and supply chain issues.
At the start of January, the company briefly lifted investor spirits by reporting that it met its production and delivery targets—producing 49,500 vehicles and delivering 51,500, just above initial expectations. But the big news for early 2025 was the easing of a previously reported component shortage, which had been holding back production. Despite this positive update, Rivian still faces substantial operating losses, reporting a $1.2 billion loss for the most recent quarter. The company is working to cut production costs by finding cheaper materials and suppliers, but the road to profitability is bumpy at best.
For the first three quarters of 2024, Rivian reported a $4 billion operational loss. While that’s a slight improvement from the $4.16 billion loss the company posted in the same period in 2023, the reality is that Rivian is burning through cash at an unsustainable pace. Since the cost of revenues is a significant issue for Rivian (and most, if not all, EV companies), scaling production becomes a big challenge with the need for heavy upfront investment in materials and components. For Rivian, increasing vehicle sales doesn’t immediately lower production costs. Unlike tech companies that can leverage economies of scale, Rivian’s path to profitability is slower and more complex.
Since Rivian is still far from profitability and in the early stages of growth, traditional valuation metrics may not give a complete picture of the company’s value. In this case, using the reverse discounted cash flow method might be a more helpful way to assess Rivian’s valuation.
Right now, Rivian’s stock is trading at $12.50 per share, which, based on my calculations, suggests an ambitious 5-year revenue compound annual growth rate (CAGR) of 31%. To arrive at this rate, I’m using Rivian’s most recent twelve-month figures for the base year, which show a revenue of $4.55 billion and the automotive industry’s average operating margins of 8% (since Rivian’s margins are currently negative). I also factored in depreciation and amortization of $1 billion and capex of $1.12 billion for the same period. For these calculations, I assumed a WACC (Discount Rate) of 10%, which is reasonably moderate, and a long-term growth rate of 2.5%.
If Rivian can turn its margins positive—at least in line with the automotive industry—it would still need to hit revenues of ~$17.5 billion by 2030. That’s a pretty steep mountain to climb, considering the challenges Rivian is facing in scaling its EV production.
Surprisingly, Wall Street’s long-term outlook for Rivian is somewhat bullish. Analysts expect the company to bring in $4.67 billion in revenue in 2025 and $40.13 billion by 2030, which suggests a solid 56% revenue CAGR.
On Wall Street, RIVN stock has a consensus rating of Hold based on two Buy, seven Hold, and two Sell ratings over the past three months. RIVN’s average price target of $13.78 per share implies a ~9% upside potential compared to current levels.
Rivian Automotive (RIVN) stock forecast for the next 12 months including a high, average, and low price target
Going against the consensus, Bernstein analyst Daniel Roeska has a Sell rating on Rivian stock and is skeptical about these long-term optimistic projections. He thinks the consensus is overestimating the market for Rivian’s cars and not fully accounting for the vast capital expenditures required to hit those revenue targets.
Another bear is CFRA analyst Garrett Nelson, who is skeptical about Rivian achieving a positive gross margin in 2025. The analyst also remains concerned about the company’s cash burn rates, especially given concerns about U.S.-based demand for EVs.
On February 20, after the closing bell, Rivian will report its Q4 and full 2024 results, although preliminary delivery figures have already been released. To beat market expectations, Rivian must report a loss per share of less than 69 cents and revenues above $1.39 billion.
Rivian Automotive (RIVN) financial forecast in view of earnings call coming up on February 20 2025
Still, I believe the key focus will be on Rivian’s goal of achieving positive gross margins in Q4 and throughout FY2025. According to last quarter’s forecast, the company aims to reach this milestone through cost-cutting initiatives and operational efficiencies. For example, Rivian has already reduced material costs per vehicle by 20% in Q4 compared to earlier in the year.
Additionally, Rivian is working on new vehicle platforms, like the R2, which are expected to significantly lower manufacturing costs. The R2 platform, set to launch in 2026, is designed to be more cost-efficient, allowing Rivian to offer vehicles at lower price points while improving margins.
So, if Rivian manages to surprise the market by posting positive gross margins and giving a bold outlook for 2025, it could trigger a stock re-rating. This would serve as a strong short-term catalyst and could help the stock spring higher and consolidate its gains, having been under pressure for so long.
I’m not a big fan of electric vehicle companies losing so much money when demand isn’t growing as fast as some may have hoped. Rivian is precisely in this predicament—struggling to scale its business and far away from steady profitability. Currently, the only way to improve margins is by cutting costs and tweaking vehicle inputs.
The management team is confident Rivian will report positive gross margins in Q4, continuing through 2025. However, maintaining strong margins over the long term will be tough. Rivian needs to scale its operations significantly to hit Wall Street’s ambitious revenue targets over the next five years. As I believe this is crucial for justifying its stock price, I’m bearish on Rivian, as I think some frustration will eventually show up during its arduous uphill climb.
Still, I think positive gross margins in Q4 and a better outlook for 2025 could give the stock a short-term boost (and thereby allow exasperated investors waiting for better levels to sell at to make a run for the trees, safe in the knowledge that this caterpillar will not transform into a butterfly anytime soon).
