Rivian (NASDAQ:RIVN) shares might have been under pressure all year, but looking further ahead, there could be a big opportunity at play for the EV maker.
Pick the best stocks and maximize your portfolio:
- Discover top-rated stocks from highly ranked analysts with Analyst Top Stocks!
- Easily identify outperforming stocks and invest smarter with Top Smart Score Stocks
At least that is the opinion of Benchmark analyst Michael Legg, who believes Rivian is “well positioned to gain significant share of a massive market opportunity in the coming decade.”
So, how big is that market opportunity? Well, according to EEI, the number of EVs on U.S. roads is projected to grow from 4.5 million in 2023 to 78.5 million by 2035, reflecting a CAGR (compound annual growth rate) of 26.9%. By 2050, it’s estimated that 89% of all vehicles in the U.S. will be BEV or plug-in hybrid, compared to just 12% this year.
That’s about what’s to come. This year, as several major automakers reduced or postponed their launches, EV growth stalled. In the first half of 2024, U.S. EV sales increased by only 7.3%, a significant slowdown compared to the 47% growth seen in the first half of 2023.
But following this year’s downturn, domestic EV production is expected to pick up in 2025 and accelerate further in 2026-27 as ASPs (average selling prices) fall to more competitive levels vs. ICE vehicles and charging infrastructure expands.
Among the emerging EV contenders, Legg sees Rivian as a standout, with multiple factors working in its favor.
“We believe Rivian’s capability to manufacture EVs domestically with in-house designed software has been validated through its partnerships with Amazon and Volkswagen,” the analyst explained.
Regarding those relationships, since 2019, the company has been in a partnership with Amazon, with an agreement to supply 100,000 EDVs (electric delivery vans) by 2030, with Legg reckoning around 15,000 have already been delivered. The company ended its exclusivity deal with Amazon in November 2023 and entered into a partnership with AT&T in December 2023. This commercial aspect of the business offers a “revenue base for Rivian to build upon as it scales the consumer side.”
Meanwhile, the company has formed a JV with Volkswagen, with the deal worth up to $5.8 billion. The JV will leverage Rivian’s software and electrical architecture, including its in-house developed electronic control units (ECUs), with Legg believing the funding will be enough to support the business and its growth initiatives. At the same time, VW’s industry connections and experience will assist the company in its negotiations with suppliers and create “engineering synergies.”
“We believe this is a major step for the company as it cements its place as a long-term player with strategic relationships,” Legg further noted.
So, what does this all mean for investors? Based on all the above and with its “highly rated vehicles, expected positive gross profit in the current quarter and sufficient financial liquidity,” Legg initiated coverage of RIVN with a Buy rating, backed by an $18 price target. Should the figure be met, investors will be pocketing returns of ~25% a year from now. (To watch Legg’s track record, click here)
The rest of Wall Street’s outlook for RIVN reflects a mix of optimism and caution. The stock carries a Moderate Buy consensus rating, based on 9 Buy, 10 Hold, and 1 Sell recommendations. The average price target of $15 suggests a modest upside of ~4% from current levels. (See Rivian stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
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.
