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Rivian Stock, Overvalued? Wall Street Sees Up To 50% Upside

Despite being a zero-revenue company with a market cap close to $100 billion, experts believe that Rivian stock is not too richly priced. Rather, they see upside potential of as high as 50%.

Electric-vehicle maker Rivian  (RIVN) - Get Rivian Automotive, Inc. Class A Report, which went public last month, has been one of the most hyped stocks in the past few weeks. The company has not posted any revenue yet, but promises to be a relevant electric vehicle player based on its electric pickup order book and manufacturing capacity.

Figure 1: Rivian's R1T pickup truck on RIVN stock IPO.

Figure 1: Rivian's R1T pickup truck on RIVN stock IPO.

Rivian’s market cap is higher than those of traditional US auto makers like General Motors  (GM) - Get General Motors Company Report and Ford  (F) - Get Ford Motor Company Report, which naturally raises questions of whether the company’s stock may be overvalued. However, Wall Street has proven bullish on the stock, as analysts project sizable upside ahead.

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RIVN: overvalued?

On November 9, Rivian disclosed a target valuation of around $78 billion pre-IPO, but the figure surpassed $100 billion quickly. Rather than being valued as a traditional automaker, Rivian’s equity benefited from the hype around the EV market — think of peer companies like Tesla  (TSLA) - Get Tesla Inc Report, Lucid Motors  (LCID) - Get Lucid Group, Inc. Report and NIO  (NIO) - Get NIO Inc. (China) Report.

But not all Rivian’s sky-high valuations can be credited to buzz and euphoria over the EV opportunity. Some of the following factors that are better grounded on business fundamentals have likely played a role as well:

  • Amazon is the largest customer and investor, at a 20% ownership stake. Rivian has secured a multi-year preorder of 100,000 delivery vans from the e-commerce giant.
  • Rivian has outlined plans to produce 25,000 vans per year by 2025 and to build a preorder backlog of 55,400 R1 vehicles by the end of 2023.
  • Production capacity is high at 150,000 units annually. Rivian also has plans to open a plant in Europe to start building vehicles by the end of 2023.

Wall Street sees gains ahead

Over the December 4 weekend, Wall Street analysts were finally allowed to begin publishing on Rivian stock. The sell-side reaction has been better than some might have expected.

The consensus view on Rivian stock is bullish with a moderate buy rating. Based on eleven reports issued so far, RIVN has an average price target of $135 that points at a bit over 20% upside ahead. At the high end, Bank of America sees RIVN climbing as much as 50%.

Rivian is “in the catbird seat”, according to Wedbush tech analyst Dan Ives. He recently initiated coverage on RIVN with a buy recommendation and set a $130 price target on the stock, which implies 18% upside potential.

A "formidably challenge to Tesla's market dominance” is Baird’s George Gianarikas take on Rivian stock. Among reasons to be optimistic, the analyst sees a promising approach to the EV market, robust balance sheet, and the partnership with Amazon  (AMZN) - Get Amazon.com, Inc. Report. Mr. Gianarikas forecasts RIVN share price at $150 over the next 12 months, suggesting 35% upside ahead.

Deutsche Bank analyst Emmanuel Rosner’s bull thesis on Rivian stock is founded on the company’s "particularly well-thought-out business plan” to be a profitable electric vehicle key player. The analyst initiated his coverage with a buy rating on RIVN and projected a $130 share price, implying nearly 20% gains ahead. He also mentioned company’s individual features in hardware and software, the Amazon alliance, and a solid electric vehicle order book.

JPMorgan’s Ryan Brinkman is skeptical on Rivian stock because valuations "clearly already [price] in a lot”. The analyst initiated his coverage with a neutral rating and $104 price target — which is just below the current stock price, at last check. However, Mr. Brinkman sees Rivian’s execution risk reduced since the company has a talented and experienced management team.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)