Rivian (NASDAQ:RIVN) shares have been highly volatile throughout 2024. After facing steep losses earlier in the year, the stock rebounded due to a joint venture and capital investments from Volkswagen. However, since peaking in mid-July, it has pulled back by 27%.
According to Wolfe analyst Emmanuel Rosner, the current share price seems to be in a reasonable range. “At a high-level, we think that reflects a return to (near-term) fundamentals,” Rosner explained. “While the JV alleviates NT funding concerns, we still see execution risks and challenges over the next few years.”
Rosner also highlighted Rivian’s long-term potential as a carmaker, citing several key advantages that could set it apart. These include its premium brand, which “resonates emotionally” with consumers, a rapidly growing consumer business, impressive engineering expertise, and top-notch software and hardware.
However, for the analyst, the “key debate” here continues to revolve around the valuation multiple, particularly as investors focus on the long-term outlook. Even in an optimistic scenario, with deliveries around 200,000 and gross margins approaching long-term targets, Rosner reckons 2028 EPS will be in the $0.30-$0.35 range. Right now, shares are trading at over 50 times this projected figure, adjusted for current value.
In addition, Rosner foresees a “long road ahead” for Rivian to achieve its gross margin targets and reach positive EBITDA. The company aims to achieve positive EBITDA by the end of 2027, compared to a loss of around $2.7 billion this year. A key factor is the continued improvement in R1 profitability, however, the most significant driver is the upcoming R2, their mid-size SUV priced between $45,000 and $55,000+, set to launch in the first half of 2026. Although Rosner anticipates higher initial costs, he thinks management has “good line of sight” on reducing material expenses, aiming for at least a 45% decrease compared to the R1, with additional benefits expected from the VW partnership.
“But,” Rosner cautions, “getting to positive EBITDA requires more than lower input costs…RIVN will need much more scale (we think production would have to be close to the 155k planned R2 capacity), relative strong ASPs (>$50k), more regulatory credit sales, and strong Opex leverage.”
Moreover, Rivian’s journey to positive free cash flow will require “another leg of improvement,” as demonstrated by Tesla, where showing consistent cash generation has been crucial in unlocking “significant shareholder value.”
Bottom line, then, Rosner rates RIVN shares as a Peer Perform (i.e., Neutral), without offering a fixed price target. (To watch Rosner’s track record, click here)
Other analysts do have a price target in mind; the average sits at $17.24, suggesting a potential 30% upside over the next 12 months. Overall, with 11 Buys, 9 Holds, and 2 Sells, Rivian holds a Moderate Buy rating. (See RIVN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
