All good things must come to an end, and Rivian’s incredible winning streak is no exception. However, despite the possibility of more volatility in the future, investors now have the opportunity to shift their focus towards the fundamental aspects of the company.
Rivian shares had seen nine consecutive days of growth prior to Tuesday’s trading session. This streak set a new record for the company, which first went public in November 2021. Throughout this impressive period, the stock price surged by 90%, marking the most substantial nine-day stretch of gains in Rivian’s history.
The surge in shares began in late June, but it was the delivery figures that truly propelled the company forward. On July 3, Rivian announced that it had produced 13,992 units during the second quarter, surpassing market expectations of approximately 11,000 units. In response to this positive news, the stock price increased by approximately 17%.
These improved production figures prompted Wedbush analyst Dan Ives to raise his target price for Rivian shares from $25 to $30 just a couple of days later. Ives also rated Rivian stock as a “Buy.” As a result, the stock price experienced a further uptick of 14% on that particular day.
Although the winning streak has now come to an end, investors can look towards the future and consider what lies ahead. Earnings reports are on the horizon, and with better-than-expected delivery numbers, Rivian is likely to achieve stronger sales and potentially smaller losses. Analysts predict a loss of $1.43 per share from approximately $1 billion in sales.
It’s important to note that Rivian is not projected to generate annual profits for several years. This trajectory is similar to that of Tesla (ticker: TSLA), which only began consistently producing profits and positive cash flow once it reached a production rate of around 400,000 cars per year.
Rivian, a leading electric vehicle (EV) startup, has recently released a strong quarterly report, which is expected to have a positive impact on its stock price. However, investors are keen to see an increase in production guidance for the upcoming quarters. Currently, Rivian forecasts the production of 50,000 units in 2023, a number that could easily be surpassed if the company maintains its Q2 performance for Q3 and Q4. The long-term goal is to establish a plant in Normal, Ill., with an annual production capacity of 150,000 units, underscoring the potential for growth in the coming years.
Stock Performance and Investor Expectations
The stock price of Rivian has experienced a significant decrease of approximately 86% since its all-time high of $172.01 on Nov. 16, 2021. However, this decline may signal an opportunity for investors who are looking for potential upside. It is important to note that the value of Rivian, including its cash balance, currently stands at around $23 billion, which aligns with Wall Street’s average price target of approximately $24 dollars per share. Analysts consider this valuation to be fair, especially when taking into account the initial post-IPO hype that led to higher valuations.
Valuing Rivian’s Stock
At present, Rivian shares trade at around three times the estimated sales for 2024. In comparison, Tesla’s stock trades at approximately eight times its projected 2024 sales. While it is unrealistic to expect Rivian’s price-to-sales ratio to match Tesla’s, this comparison provides a useful reference point for Rivian investors. It is worth mentioning that Rivian has yet to generate free cash flow, which distinguishes it from Tesla. However, as Rivian continues to exceed production estimates and demonstrate effective execution, its stock price is likely to keep rising, gradually closing the valuation gap between Rivian and Tesla. Ultimately, Rivian’s stock will be valued based on its earnings and free cash flow, similar to other established companies. However, this transition may take time and is not expected to occur in the immediate future.
Rivian’s solid quarterly report has set a positive trajectory for its stock price. As the company gradually increases its production capacity and continues to deliver on expectations, investors can expect to see a rise in stock value. The current valuation of Rivian aligns with the industry average, reflecting a fair assessment by analysts. While Rivian’s stock performance may not match Tesla’s at present, the company’s steady progress and potential for profitability indicate promising prospects for the future. It is important for investors to consider Rivian’s unique position in the market and evaluate its long-term growth potential.