Rivian Automotive Inc (NASDAQ:RIVN) stock shattered all expectations on Wallstreet following its IPO debut on November 9. The Amazon backed EV company issued 153 Million shares at a price of $78, which raised just shy of $12 Billion. Shortly after Rivian Automotive’s debut, the Rivian Stock price skyrocketed causing valuation concerns. Rivian’s Market Capitalisation surpassed the likes of Ford and General Motors. Now with plenty of investor interest, this article will dive into the Rivian Stock Forecast over the next few years.
Table of contents
- So why did the market go crazy about Rivian Stock?
- Rivian Stock Forecast: Can Rivian disrupt EV giants?
- Elon Musk highlights production and cash flow hurdles ahead
- What’s next for Rivian?
- Rivian Stock Forecast: The Bottom Line
So why did the market go crazy about Rivian Stock?
Over the past few months, we saw the Electric Vehicle market somewhat recover the deeply entrenched losses suffered in the second quarter of this year. EV Market leader, Tesla (NASDAQ:TSLA) stock jumped above the $1,000 mark while Lucid Motors Stock (NASDAQ:LCID) jumped 40%.
In the midst of this EV rally, Rivian Automotive went public and the market conditions created a perfect storm for a buying frenzy.
However if we look internally, Rivian is currently backed by Amazon which have a $21 Billion stake in Rivian stock, equivalent to roughly 20%. Amazon have ordered 100,000 Rivian Electric Delivery vans through 2024 with plans for the first 10 to be delivered in 2021. With both Amazon and Ford owning large stakes in Rivian, this fuelled additional investor confidence once Rivian went public.
Rivian Stock Forecast: Can Rivian disrupt EV giants?
While Rivian has only delivered 156 vehicles (R1T models) so far, investors see Rivian as a true long term player in the EV space. However, Rivian’s long term threat to a company like Tesla or Lucid Motors may not be as direct as some investors think.
Rivian aim to break into the Pick-up Truck, SUV and Commercial Van markets while companies such as Tesla plan to continue to dominate the luxury EV space.
While investor sentiment peaked early, Rivian still has a long way to go before it starts generating break-even cashflow. Running a profitable Electric Vehicle business is an extremely difficult task, just ask Elon Musk.
Elon Musk highlights production and cash flow hurdles ahead
In a recent tweet, Elon Musk responded to a question on Twitter regarding the recent IPO of Rivian. Musk highlighted that the true test for Rivian will be maintaining high production as well as a break-even cashflow.
Tesla has long been revered as the company with the first mover advantage in the commercial Electric Vehicle industry. However, Tesla has also been eerily close to bankruptcy and struggled to maintain healthy cash flow throughout its early model rollouts.
In theory, disruptors such as Tesla will experience both the benefits of being the first mover while also encountering more risk or higher costs in Research & Development.
As for Rivian, investors are hoping that the skyrocketing demand in EV’s will see the company grow out of a pre-revenue phase at a much faster rate than Tesla did. Electric Vehicle demand is at an all time high and is forecasted to grow at a compound annual growth rate of 26.8% through to 2030. For pre-revenue EV start-ups like Rivian, executing production milestones in a timely fashion will be key.
What’s next for Rivian?
Currently, Rivian’s Pick-Up Truck model R1T and its SUV model R1S have received 55,400 pre-orders to date. The pre-orders have a US $1,000 deposit that is fully refundable, with pre-orders limited to the United States and Canada. While the impressive pre-orders highlight the demand for the R1T and R1S, they do not accurately show true intention to purchase.
We saw early this year, Lordstown Motors fall into some murky water after making certain disclosures about pre-orders for their vehicles. An internal investigation found “Lordstown Motors made periodic disclosures regarding pre-orders which were, in certain respects, inaccurate.” Therefore, it is always worth taking pre-orders for what they actually are.
Earlier this week, Rivian Automotive was rumoured to be in late-stage discussions to open a vehicle manufacturing and battery plant east of Atlanta. The source came from “The Atlanta Journal-Constitution”, which noted the discussions were currently not finalised at this stage and could still be subject to change.
The article noted that the “Rivian project likely would be one of the biggest economic development deals in Georgia in a decade, with the potential to bring thousands of jobs while cementing the state as a powerhouse in the electric vehicle industry.”
Rivian Stock Forecast: The Bottom Line
Overall, Rivian Stock (NASDAQ:RIVN) continues to gain momentum this week following its successful $12 Billion IPO. While the hype is at an all time high, the company still has many hurdles to jump over the next 5 years. The Amazon backed EV start up is still in a pre-revenue phase, which applies additional pressure on the companies production timeline. Especially considering the companies current market valuation.
Over the next few weeks, we can expect Wallstreet analysts to begin coverage on the Rivian Stock Forecast over the next few months. The coverage from Wallstreet will also provide insight into when analysts believe Rivian will begin generating significant revenue. Lastly, Investors are also keeping their eyes peeled for official news regarding the companies rumoured vehicle and battery plant talks.
Follow us on Google News here to get minute-by-minute updates on when we post on any device via the Google News App.
The content above is strictly for informational purposes only and is not financial advice nor does it constitute a recommendation. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Looking to start trading in Australia or the UK?
Do you live in Australia or the United Kingdom and looking to invest in the US market? Good news! We’ve partnered with Stake. Trade 4,500+ US stocks and ETFs with $0 brokerage and no fx fees per trade. Use our code “YIG” to receive a free stock when funding your new account.
In addition, Stake is one of the leading US trading platforms for Australian and UK investors. Click hereto start trading US stocks with a streamline trading experience. Lastly, for more information on our referral program and how it works click here.