Rivian Automotive‘s (NASDAQ: RIVN) stock hit a record high of $172.01 on Nov. 16, 2021. This surge, representing a 120% jump from its IPO price of $78 within a week, propelled the electric vehicle (EV) maker’s market capitalization to $153 billion.
Fast-forward to the present, and Rivian’s stock now hovers around $11, with a market cap of $11 billion. Similar to numerous other EV manufacturers, Rivian grappled with supply chain disruptions, rising costs, and consistent losses. The company also faced a cooling EV market and increased interest rates, leading to a compression of its valuation. However, could this underdog EV manufacturer return to a $100 billion valuation by 2035?
Image source: Rivian.
The Descent: Understanding Rivian’s Stock Decline
Rivian specializes in manufacturing electric pickups, SUVs, and custom electric delivery vans for major investor Amazon. During its IPO, Rivian boasted a production capacity of 50,000 vehicles in 2022. However, this figure was later halved to 25,000 vehicles, and the company fell just short of this revised target by producing 24,337 vehicles that year. These setbacks prompted Ford Motor Company to divest most of its Rivian shares in 2022.
In 2023, Rivian saw relief in its supply chain challenges and delivered 57,232 vehicles. However, for 2024, it plans to manufacture approximately 57,000 vehicles amid challenging external conditions, fierce industry competition, and a planned shutdown of its primary facility. This pause aims to optimize production, introduce new technologies, and streamline operations by reducing its workforce by 10%.
Despite facing hurdles, Rivian remains committed to expanding its production capacity and introducing new vehicle models like the R2, R3, and R3X over the next few years. These models are designed to cater to different market segments, promising variety and innovation. Furthermore, Rivian aims to fulfill its pledge of delivering 100,000 electric delivery vans to Amazon by 2030.
Analysts project Rivian to achieve $12.2 billion in revenue by 2025, indicating a notable compound annual growth rate of 40% since 2023. These forecasts suggest that Rivian may leverage economies of scale and overcome existing supply chain constraints.
Calculating Rivian’s Potential Value by 2035
If Rivian sustains its growth trajectory and achieves a 40% CAGR in revenue from 2025 to 2035, it could amass $350 billion in revenue by the final year. Applying a conservative valuation of 2 times sales, Rivian’s market capitalization could exceed $700 billion. However, maintaining a high CAGR in a competitive market presents substantial challenges.
If we moderate expectations and project a 20% CAGR, Rivian could still reach $150 billion in market cap by 2035. This scenario suggests a potential revival from its previous market peak in November 2021. Nevertheless, a resurgence in investor confidence could push Rivian’s valuation even higher if reevaluated at 4 times sales.
In sum, Rivian stands at a crossroads where reclaiming a $100 billion market cap by 2035 seems within reach. Nonetheless, investors must exercise caution as the company navigates through transformative phases in the coming years.