Rivian Automotive, Inc. (RIVN) has been making headlines recently with the unveiling of its second-gen, affordable model R2, along with a smaller R3 model and a performance variant of the same model, codenamed R3X. This news has sparked a strong rebound in Rivian’s stock price, with shares seeing a significant increase over the past two sessions.
One fund manager, Gary Black, recently compared Rivian to Tesla in 2019, when many were skeptical of Tesla’s future. Black sees Rivian’s production potentially increasing to 215,000 units once the Normal, Illinois plant is expanded to manufacture the R2 model. Currently, R2 production is planned at the Georgia facility, with unit volume expected to reach 400,000 units when production of the third model, R3, begins. In total, Black forecasts production of 615,000 units in five to seven years.
Black’s analysis suggests that if Rivian’s vehicles maintain an average selling price of $45,000 and a 20% auto gross margin, deliveries could reach 526,000 units by 2030, generating revenue of $22.7 billion and EBITDA of $2.5 billion. Applying a 3.5 times EV/revenue multiple similar to Tesla, Rivian’s shares could be worth $67 apiece by 2030, representing a 136% upside potential.
Alternatively, valuing Rivian based on EV/EBITDA with a Tesla-equivalent multiple of 20 times could result in a stock price of $45 per share by 2030 or $20 per share currently, offering a 57% upside potential.
The comparison to Tesla is significant, as Tesla faced its own challenges during the production ramp-up of its mass-market Model 3. The company experienced a cash crunch and fluctuating profitability, leading to investor uncertainty. Despite these challenges, Tesla eventually found success and has become a leading player in the electric vehicle market.
Rivian’s recent announcements have generated excitement among investors and analysts, with many seeing potential for the company to follow in Tesla’s footsteps. As the electric vehicle market continues to grow, Rivian’s innovative models and production plans could position the company for long-term success.
In conclusion, Rivian’s recent developments have sparked optimism among investors, with the potential for significant growth and value creation in the coming years. As the company continues to expand its production and offerings, Rivian could become a key player in the electric vehicle market, following in the footsteps of industry giants like Tesla.
