I know you‘ve been following Rivian‘s story. This electric vehicle startup had that meteoric rise after its IPO last year. Now the stock price plunged as the trucks face recall issues. With all the ups and downs, it‘s reasonable to ask – where will Rivian be in 2025? What returns can investors expect down the road?
I‘ve analyzed Rivian‘s business model, financials and the EV market outlook extensively. As an industry analyst, I enjoy creating valuation models to forecast future stock performance. Let‘s grab coffee and I’ll share my in-depth insights on Rivian, including the key factors that led me to a $80 price target for 2025.
A Quick Look at Rivian‘s History
First, some background. Rivian was founded in 2009 by RJ Scaringe as an EV truck startup. Here are some key milestones:
| Year | Milestone |
|---|---|
| 2009 | Rivian founded |
| 2019 | $700M investment round from Amazon and others |
| Sept 2021 | Begins delivering R1T launch edition |
| Nov 9, 2021 | Goes public at $78 per share |
| Nov 16, 2021 | Stock peaks at $179 per share |
Rivian captured incredible hype in 2021 as one of the only EV truck options besides Tesla‘s delayed Cybertruck. However, executing the manufacturing ramp-up proved challenging:
| Deliveries | |
|---|---|
| Sept-Dec 2021 | 396 |
| Q1 2022 | 1,227 |
| Q2 2022 | 4,467 |
| July-Oct 2022 | ~14,000 |
This slow pace concerned investors, along with the October recall. But with smart strategic moves, Rivian could still dominate this category.
Evaluating the Market Potential
Rivian launches vehicles just as EV adoption approaches a tipping point. EV sales could hit 15-20% globally by 2025 – a pivotal benchmark suggesting mainstream popularity.
Many analysts predict explosive industry growth. For example, BNEF projects EV sales rising from 6.6M in 2021 to 24.3M in 2025. Accelerating growth past 2025 seems likely with looming phase-outs of gas vehicles.
Government policy provides additional tailwinds. The Inflation Reduction Act includes up to $7,500 tax credits for new EV purchases. Multiple states also have their own incentives on top of this. Such policies will motivate buyers to choose electric.
With all factors considered, EVs appear poised for hockey stick adoption curves in coming years. Rivian launches its compelling trucks and SUVs right as this wave accelerates, if it can deliver reliability at scale.
Morgan Stanley analyst Adam Jonas, who has a $60 price target on Rivian, sees room for multiple winners in this vast market: "There’s going to be far more demand than there is supply…even without any manufacturing snafus, that’s going to be the case for many years."
Of course, economic risks cloud the near-term outlook. However, dips represent buying opportunities for long-term investors.
Bull Case Scenario Analysis
Let‘s walk through what needs to happen for Rivian to hit or even exceed my $80 price target:
- Rivian fixes manufacturing bottlenecks and completes its domestic factory network
- Ramp allows ~250k vehicle deliveries by end of 2025 even if gradual
- Revenue growth accelerates with high average sales prices (initially ~$85k)
- Upfront investments and low volumes limit near-term profitability
- Mainstream US EV adoption hits 20% by 2025 amid supportive policy
- Rivian retains dominant share in electric truck/SUV niche
This combination enables a best-case scenario where Rivian sees its growth story re-ignite. As a first mover in a hot category, sales demand outpaces production capacity for years. I could envision 2025 deliveries reaching 300-350k in an exceptionally bullish case.
Valuing Rivian depends hugely on what revenue multiple investors apply. Tesla trades at 9x 2023 sales forecasts currently, albeit at vastly larger scale. If Rivian earns tech-like multiples with its 36% gross margins, shares could hit $150+ again. Of course, that depends on flawless execution.
All in all, Rivian regaining a valuation above ~$100 billion seems achievable if it transforms into a category leader. A blockbuster success would bring tremendous investor returns from today‘s levels.
Key Risks and Bear Case
However, risks certainly abound. Production setbacks have hampered Rivian so far. Consumer recession fears or reduced EV subsidies could also limit demand growth. If Rivian struggles to sell its produced vehicles, it may need to discount prices or cut costs.
Perhaps the greatest risk lies with new competitors. Conventional automakers like Ford and GM are pouring money into their own electric trucks and SUVs. Most will reach market over the next 2-3 years. If these models resonate better with buyers, Rivian could see its first-mover status erode quickly.
In a plausible bear case, Rivian continues diluting shareholders to fund cash burn in the face of operational stumbles and intensifying competition. The stock could retest 2022 lows near $20, or worse.
JPMorgan‘s auto analyst Ryan Brinkman sees risks of increased competition limiting Rivian‘s valuation upside. He maintains a $28 price target and Neutral rating: "We continue to appreciate Rivian’s products, but its targeted segmentation will see substantial competition from both startups and established OEMs over the next several years”.
Weighing the Potential Outcomes
Both compelling upside and considerable risk exist here, given the uncertain path to large-scale manufacturing as a new auto maker. I incorporate both perspectives into my forecast models.
The key uncertainties I weighed most in my analysis were:
- Pace of production ramp: Rivian‘s 2025 volumes could vary widely from 150k to 350k
- Market size evolution: EV truck TAM may stay niche or could expand exponentially
- Valuations: Investor sentiment hard to predict. 2025 P/E ratio could range from 20x to 60x
Considering everything, I believe Rivian at $80 per share by end of 2025 (implying a $65B valuation) strikes the right balance:
- Allows for operational stumbles and delayed scale-up
- Accounts for intensifying competition
- Still sees exponential revenue growth on mainstream EV uptake
- Applies a reasonable 30x forward P/E multiple by 2025
Of course, with growth stocks, future potential matters most. By 2030, Rivian could disrupt auto markets like Tesla did this past decade if cards fall right. That possibility makes shares compelling, albeit risky, for long-term investors.
Conclusion: Returns Should Follow If Rivian Delivers
Rivian clearly faces risks as it works through the manufacturing ramp gauntlet in competitive markets. However, success could bring immense rewards given the enormity of the electric vehicle opportunity.
I believe Rivian has a strong chance of becoming one of the market‘s largest players behind Tesla over time if it achieves quality production at scale. The R1T and R1S models should see intense demand. Pre-orders already reflect tremendous early interest from consumers.
The most likely path seems to fall between speculative hype and skepticism. Share prices recovering into triple digits depend on flawless execution. But with its brand appeal and backing, Rivian appears positioned to drive the future of electric trucks and SUVs.
If Rivian reaches production milestones and seizes first-mover advantage, its growth trajectory looks highly compelling. At around a $65 billion valuation, Rivian establishing itself as the #2 US EV maker seems reasonable by 2025.
I hope walking through my detailed insights and analysis into Rivian and EVs helps as you evaluate investing in this emerging leader! Feel free to reach out with any other questions.
