Rivian Automotive, Inc. RIVN shares have seen a strong rebound from near record lows over the past two sessions, catalyzed by the unveiling of the electric-vehicle startup’s second-gen, affordable model R2, a smaller R3 model and a performance variant of the same model, codenamed R3X. A fund manager on Friday said the stock could be poised for further upside.
Creative Resonance:“$RIVN [Rivian] reminds me of $TSLA [Tesla] in 2019 when naysayers predicted it would run out of cash and the equity would be worthless,” Gary Black said in a post on X. The fund manager sees Rivian’s production increase to 215,000 units once the Normal, Illinois plant is expanded for manufacturing R2.
The R2 production is currently planned at the Georgia facility.
Unit volume will likely increase to 400,000 units when the production of the third model, R3, begins at the Georgia facility. So, together, the analyst forecasts production of 615,000 in five to seven years.
Assuming an average selling price of $45,000 for Rivian’s vehicle lineup and a 20% auto gross margin, deliveries could hit 526,000 units by 2030, revenue to $22.7 billion and EBITDA to $2.5 billion, Black said.
Applying a 3.5 times EV/revenue multiple – equivalent to Tesla, Rivian’s shares could be worth $67 apiece by 2030. While discounting the stock price at a 14.1% equity discount rate, the net present value of the stock would be $30 per share, suggesting a 136% upside potential.
While valuing based on EV/EBITDA, applying a Tesla-equivalent multiple of 20 times gives Rivian a stock price of $45 per share by 2030 or $20 per share currently. The $20 per share price target suggests the stock offers 57% upside potential.
Analyzing Importance: Tesla faced a severe cash crunch during the production ramp-up of its first mass-market EV – the Model 3, so much so that CEO Elon Musk contemplated going private.
Incidentally in 2017 when Model 3 production started, Musk approached Apple’s Tim Cook to buy the company. Although turning profitable for two straight quarters in 2018, the company sunk back into losses in 2019, dragged by the phasing out of EV tax credits, and spiraling costs amid the Model 3 ramp-up. Investors’ confidence slumped amid the setback and by early June 2019, the stock fell about 49% from the start of the year, before making a comeback.
Black, who is a Tesla bull, last week trimmed his Future Fund’s stake in the EV giant significantly, reasoning that Wall Street will likely trim its estimates for the first-quarter and 2024 deliveries over the coming weeks. He also sees the scope of further price cuts due to bloated inventory levels.
Tesla currently has a 2.93% weighting in the Future Fund Active ETF FFND, the firm’s actively managed exchange-traded fund, while Rivian makes up 1.76%.
Rivian ended Friday’s session at $12.78, up 2.16%, according to Benzinga Pro data.
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