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Discussion Starter · #1 ·

One analyst thinks shares of the fast-growing electric vehicle maker could nearly double over the next 12 months.
There are some pretty bullish targets for electric vehicle (EV) maker Rivian's (RIVN -1.08%) shares. Indeed, the average 12-month price target for the stock implies about 40% upside from where shares are trading today. Even more importantly, one of the most recent Wall Street notes on the stock featured an outperform rating and a $75 price target (nearly 100% upside) for the growth stock.
Are analysts getting ahead of themselves? Or is the stock truly positioned for such a staggering run-up?

The bull case for Rivian stock
In general, analysts are expecting Rivian's soaring revenue to continue, driving costs lower as a percentage of revenue and eventually making the company a cash cow like Tesla. After all, the company's vehicle deliveries really are skyrocketing. Second-quarter Rivian deliveries were 4,467 -- up nearly fourfold from the 1,227 vehicles the company delivered in the quarter ending just three months earlier.

And this is only the beginning. Rivian has enough tooling installed at its factory in Normal, Illinois to get to an annualized production rate of 150,000 units. In addition, the electric car company has a fast-growing preorder backlog, registering at about 98,000 units at the end of Q2.

With a vehicle lineup focused on the hot pickup and SUV market and strategic positioning in the commercial vehicle space with all-electric commercial vans, there's good reason to believe the company will see demand outstrip supply for the foreseeable future. Not to mention that a strategic partnership with Amazon (AMZN -2.18%) as a major customer of its commercial vans is a major catalyst for the company.

RBC Capital analyst Joseph Spak cited Rivian's recent move to partner with Daimler AG's Mercedes-Benz to jointly produce electric vans in Europe in a few years as an additional reason to be optimistic on shares. This will accelerate the company's move into the region's massive commercial van market, Spak said in a note to investors last week. The analyst has a $75 12-month price target on the stock.

Significant valuation risk
All of this sounds great. And a $75 price for Rivian shares a year from now sounds mouth-watering.

But here's where the thesis starts to fall apart: Valuation. Rivian is already priced for extraordinary growth and success. The company has a market capitalization of nearly $35 billion, despite generating just $514 million in trailing-12-month revenue. Even worse, the company's trailing-12-month net loss is $1.7 billion. Furthermore, over this same time period, free cash flow was negative $1.6 billion.

A lot can go wrong between now and when the company finally becomes consistently profitable. Sure, its strong preorder and sales growth suggest Rivian will likely be successful long-term. But the stock's sky-high valuation isn't leaving any room for error.

Despite analysts' bullish view of Rivian stock, investors may be wise to stay on the sidelines and hope for a better entry point into the growth stock at a significantly lower price. Sure, this chance may never come. But investors don't have to swing at every pitch. They can wait patiently for the ones with better risk-reward profiles.

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· Registered
477 Posts
Discussion Starter · #9 ·
I find it fascinating that Rivian's market cap, at current ca. $38 per share, is a whopping $33B, while Porsche's IPO target is a market cap of ca. $75B. VW's market cap is ca. $87B! (Ford is ca. $60B!!)

I own RIVN so I want the stock to do well ... but going to $75 per share without some very significant milestone seems outlandish. That's why I think it will take a few years to get there.
I mean.... Tesla's shares are crazy for some very small overall production. So based on Tesla... anything is possible.
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