Rivian(NASDAQ: RIVN) has been a difficult stock to pin down. Shares have soared by 100% or more during certain trading periods. But over the long term, the stock has been a major loser. Since shares went public in 2021, they've lost around 90% of their value.
Yet Rivian operates in one of the largest industries in the world: Transportation. Specifically, it's competing in one of the fastest-growing categories of the transportation industry -- electric vehicles.
After the crash, is now the time to bet big on this beleaguered EV stock?
Wall Street doesn't know what to make of Rivian
When making an investment, it's a wise move to check in on what Wall Street experts think of the business. These analysts are fallible human beings like anyone else. But they've done a lot of research, and in many cases they know the industry dynamics top to bottom.
When Rivian IPO'd in 2021 at $78 per share, Wall Street price targets were all over the place, ranging from $93 to $135. Contrary to expectations, however, the stock price immediately crashed. One year after going public, the share price was down to just $30 per share. But Wall Street didn't give up. It lowered its price targets, but still believed there was upside to go, with price targets ranging from $34 to $63. What happened next? The share price plummeted again, forcing Wall Street to lower its targets yet again.
Rivian's share price is now around $13. Wall Street, for what it's worth, has a consensus price target of around $18, suggesting roughly 35% in potential upside. Could Wall Street finally be right? Actually, there's good reason to believe Rivian's stock price has finally turned a corner.
Rivian stock is a risky bet with high potential upside
Rivian's struggles from a stock price perspective haven't necessarily reflected the strength of its underlying business. As the stock price lost 90% of its value, revenue actually climbed from essentially zero to above $5 billion. Rivian's flagship models, meanwhile, have drawn plenty of praise. Consumer Reports recently revealed that the company has greater customer loyalty levels than any other vehicle manufacturer, electric or otherwise.
Rivian's weak stock price, therefore, has simply been a reflection of the market overpricing shares early on. Expectations were simply too high in 2021, a period of time in which billions of dollars were flowing to renewable energy businesses. When that bubble popped, Rivian's stock price followed suit.
RIVN Total Return Level data by YCharts.
To be sure, Rivian still faces challenges in 2024, 2025, and beyond. It needs to invest billions of dollars to get its mass market models -- the R2, R3, and R3X -- to market. A recent multi-billion-dollar partnership with Volkswagen and an $827 million incentive package from the state of Illinois should help, but more capital will likely be needed.
However, if the company can get these new vehicles to market, it should send revenue soaring. Before Tesla released its mass market Model 3, for instance, total company sales stood roughly around where Rivian is today. New mid-market options like the Model 3 and Model Y pushed company revenue above $30 billion in just a handful of years.
TSLA Revenue (TTM) data by YCharts.
With a reputation for quality and a suite of new vehicles priced under $50,000 set to hit the roads over the next 12 to 36 months, Rivian stock is likely in a "quiet" period. Not much will change over the next year or so, apart from any changes in production or timeline guidance. But I'm betting that once Rivian's new models hit the road, they'll be a success. Its execution with its R1T and R1S lends it credibility, while Tesla's rise demonstrates what happens when an EV company is able to crack the mass market.
If Rivian is successful, expect it to command a market cap far greater than the current $13 billion. But this is a long-term story. With few major catalysts this year, shares should remain volatile, reacting heavily to any available news. But the upside is hard to deny. If you're a high-risk growth investor looking for maximum upside potential, Rivian stock could be for you.
If that description doesn't fit your investing style, however, an EV ETF might be for you. It will spread your bets so that regardless of which manufacturer wins long term, your portfolio can still benefit from the rise of electric vehicles.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Volkswagen Ag. The Motley Fool has a disclosure policy.
