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The slump in the electric vehicle (EV) industry has only worsened in 2024, which is reflected in the price action of EV stocks. U.S. market leader Tesla (TSLA) is the worst-performing S&P 500 Index ($SPX) stock of the year, while Rivian Automoative (RIVN) and Lucid Group (LCID) have respectively lost 55% and 28.3% YTD.
Life has come full circle for the EV industry, which was quite popular among investors until about a couple of years back. For instance, at its peak in late 2021 - which came shortly after its mega IPO - Rivian commanded a market cap above $150 billion, which was even higher than Ford Motor Company (F) and General Motors (GM).
However, the EV industry has since been in the news mostly for unpleasant reasons, ranging from guidance cuts at the least to bankruptcy at the extremes. With the EV industry slump not getting any better, what’s the forecast for Rivian stock - and how low can this once-promising EV startup fall? We’ll discuss below.
Why Is Rivian Stock Going Down in 2024?
While the EV industry slump is among the key reasons Rivian stock is going down in 2024, the company’s guidance has only added fuel to the fire. RIVN said that it expects to produce just 57,000 cars in 2024. That figure was not only way below the over 81,000 cars that analysts expected it to produce, but even lower than its 2023 production.
While the EV industry is going through a severe slowdown in growth, a YoY fall in deliveries is probably the last thing that markets would expect from a supposed “growth company.”
Like almost all other startup EV companies, Rivian continues to burn cash, and is losing money on every car that it sells. While investors were more than willing to overlook EV companies' sprawling losses and cash burn until about two years back, three things have changed over the period.
First, the near-term demand environment for electric cars has worsened, pushing the industry into an oversupply situation. Second, and on a related note, there has been a massive price war which is only adding to the woes of EV companies.
Finally, as the Fed squeezed out easy money from the system through its rate hikes between 2022 and 2023, loss-making companies fell out of favor with investors, who instead pivoted to larger and more stable companies.
How Low Will Rivian Stock Go?
Rivian’s Street-low target price of $9, from UBS, implies that the stock could fall another 13.5% from current levels. Incidentally, UBS double-downgraded RIVN stock from “buy” to “sell” after the company’s Q4 earnings, and cut its target price from $24 to $8. It more recently raised the stock's target price to $9, but maintained its “sell” rating.
The consensus view is much more bullish, though. Rivian has a “Moderate Buy” rating overall, with a target price of $19.30 - which is nearly 79% higher than Friday’s closing price.
Rivian Unveiled Low-Cost Models
Earlier this month, Rivian unveiled its low-cost R2 vehicle, which will be priced at around $45,000, with deliveries expected to start in the first half of 2026. The company also announced the next-gen R3 vehicles, which will also be priced below the R1 vehicles that it currently sells.
To lower its cash burn, Rivian delayed the construction of its Georgia plant, and the R2 vehicles will instead be built at the Illinois plant. Previously, the company said that its cash should fund its operations until 2025, but since it has paused the construction of its upcoming plant in Georgia, the cash should last a bit longer.
RIVN Stock Valuation: Is It a Buy?
Rivian is a relatively well-funded EV company, and had $9.4 billion as cash and cash equivalents at the end of 2023. Its market cap is around $10.5 billion, and after accounting for the debt on its balance sheet, we get an enterprise value of $6.1 billion.
The company currently trades at a next 12-months enterprise value to revenue multiple of 1.25x. I believe that RIVN stock is now very near its bottom, and just as the euphoria toward EV stocks peaked in 2021, we could see the pessimism toward this group similarly bottom out sometime over the next year.
The EV industry should see consolidation, as well, as rationalization of supply and pricing - coupled with an eventual cut in interest rates - should help drive up market sentiments, and by extension the share prices of EV companies.
As for Rivian, the management has its task cut out for it. It needs to scale up production, lower its costs, and cut down on the cash burn. The company needs to start churning out profits sooner rather than later, beginning with a gross profit - which it expects to achieve by the end of this year.
These tasks won’t be easy, and CEO RJ Scaringe will almost need to pull an Elon Musk, who led from the front as Tesla transitioned from “production hell” to the EV behemoth it eventually became.
On the date of publication, Mohit Oberoi had a position in: RIVN , GM , F , TSLA , LCID . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
