Rivian Stock Price Forecast February 2022 – Time to Buy RIVN Stock?

2021 was a record year for the US IPO market. In the EV (electric vehicle) space Rivian and Lucid Motors went public through a traditional IPO and SPAC merger route respectively. Rivian was the biggest IPO of the year and the largest since Facebook’s 2014 IPO.

Rivian’s IPO sailed through easily and the company priced the shares at $78 each, which was above the already increased price range. The stock had a good listing and went on to hit an all-time high of $179.47, which was over twice the IPO price.

RIVN stock has been quite volatile

At its peak, RIVN commanded a market cap of around $150 billion. Many saw it as a sign of optimism towards pure-play EV companies. However, there were skeptics, which included Tesla’s CEO Elon Musk, who found the valuation too high. Musk, who uses his Twitter account brilliantly to connect with his millions of followers, mocked the high valuations of Rivian.

To be sure, it was tough to justify Rivian’s $150 billion market cap considering the fact that the company has only recently started delivering cars. However, the EV industry has been working on a derivative valuation model where the valuation of one stock is used to justify the value of the other. Since many see Rivian as the “next Tesla” they saw its valuation as reasonable pointing to Tesla’s over $1 trillion market cap.

There indeed is merit in the argument and relative valuation is an established valuation framework. However, where bulls erred was on the execution part. Tesla’s road to the $1 trillion market cap was full of potholes. The company went through what Musk famously called a “production hell.” Musk was also contemplating selling the company to Apple during the ramp-up of its mass-market Model 3.

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Rivian stock recent developments

Rivian said in January that it produced 1,015 vehicles in 2021 and delivered 920 of these during the year. In its third-quarter shareholder letter which was released in December, the company said that it had over 71,000 net orders for its vehicles. It also has a 100,000 initial order from Amazon, which is also its major shareholder.

In December only, Rivian announced its second plant in Georgia. The plant would have an annual capacity of 400,000 vehicles and the construction is expected to begin in 2022. The company expects to roll out vehicles from the plant, which would be built at a cost of $5 billion, in 2024. It is also increasing the nameplate capacity of its Illinois plant to 200,000 vehicles annually. Cash is not a concern for now for Rivian as the company raised $13.7 billion from its IPO last year.

RIVN has three models

RIVN currently has three certified models in the US. These include the R1T, R1S, and EDV. The company’s models look impressive and if it can scale up production efficiently, demand should not be a concern. Almost all of the pure-play EV companies as well as legacy automakers producing electric cars are constrained by supply, not demand. Even Ford stopped taking more orders for the all electric model of its best-selling F-150 after the initial 200,000 vehicles.

Rivian stock forecast

Rivian stock went as low as $50, which was even below its IPO price. The stock has since recovered but is still below the IPO price. There has been a terrible sell-off in growth stocks and all EV stocks including Tesla have tumbled. Loss-making tech companies have been out of favor with investors amid the expected increase in interest rates

Wall Street analysts meanwhile look quite bullish on RIVN stock. Of the 16 analysts covering RIVN, 11 have a buy or equivalent rating while five have a hold rating. Its median target price of $130 is almost double the current stock price. The street low target price of $84 is a premium of 28% while the street high target price of $170 is a premium of 159%.

Morgan Stanley on RIVN stock

Morgan Stanley analyst Adam Jonas, who is among the most prominent Tesla bulls, issued a bullish note on Rivian also. He said, “While Rivian is at a far earlier stage in its industrial journey than Tesla, we do not see this company as just a ‘concept stock’ either. The road to ramping production will be choppy, but we expect largely due to supply rather than demand.”

Jonas added, “An IPO that preceded the December market top, the reality-check of supply chain bottlenecks (normal in auto land, perhaps not normal in tech land), and the gut-check of having partner Amazon exercise its right to secure EDVs from alternative vendors (Stellantis, Daimler) has shaken investor confidence and, we think, provides an excellent opportunity to gain exposure to a company, product cycle, and business model that we believe has a greater chance [of] being a winner in this industry than most other EV competitors.”

Rivian stock long term forecast

The long-term forecast for RIVN stock looks positive looking at the expected demand growth for EVs. If the company can scale up production, it can be a worthy competitor in the EV industry. Association with Amazon and Ford are another positive for Rivian.

Should you buy Rivian stock?

Rivian is a high-risk bet on the EV transition. Ramping up production hasn’t been easy for startup EV companies and many have faltered. So far, Rivian has impressed with its execution. However, it has to increase the production multi-fold to justify the valuations.

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