Reporting Q2 earnings earlier this month, electric truck maker Rivian Automotive (NASDAQ:RIVN) made a startling prediction: By the end of 2023, Rivian says it will have delivered 52,000 EVs to its legions of fans. That seemed a bold promise, considering that just last year, Rivian promised to build 50,000 EVs… and then failed to deliver on that goal. But with another year under its belt, and improvements made on its production lines, perhaps 2023 is the year that Rivian finally lives up to its promise?
Perhaps. With a share price down 88% from its just-post-IPO high — and down 29% since just the end of July — it seems more than a few investors are getting a little bit tired of waiting for Rivian to live up to its potential.
And yet, hope springs eternal.
On Thursday, Needham analyst Chris Pierce published a bullish note on the subject of Rivian, reiterating a “buy” rating on the stock and predicting that Rivian stock, below $20 apiece today, will soar more than 50% to top $31 a share within the next 12 months. (To watch Pierce’s track record, click here)
As Pierce explains, Rivian enjoys certain advantages in starting with a “clean slate” electric truck design. For one thing, it can design its EVs purpose-built for an electric drivetrain. For another, it can design its supply chain to support this purpose. And for a third, Rivian has the luxury of being able to pick and choose the specific slices of the automotive market that it wants to target, in the order it wants to target and capture them. Unsurprisingly, it’s elected to begin with the most profitable segments of all: pickup trucks and SUVs.
What may surprise you to find out, is that according to Pierce, this strategy is working. Rivian is successfully selling electric trucks, and customers like what it’s producing.
Citing 25 weeks of accumulated data from “#1 used vehicle marketplace platform” Cargurus, Pierce argues that pricing of Rivian trucks and SUVs on the secondhand market demonstrates that Rivian’s EVs are holding their value better than EVs from “its only competitor in electric pickups” — and here Pierce is talking about Ford and its electric F-150 Lightning.
Cargurus data show fewer Rivian R1T electric pickups available for sale secondhand (indicating that Rivian owners are less willing to part with their R1Ts, than are Ford owners willing to part with their F-150 Lightnings). And Pierce points out that this is the opposite result from what you’d expect, given that Rivian is producing R1Ts at a faster rate than Ford is churning out F-150 Lightnings.
Furthermore, Cargurus data show that Rivian’s R1Ts are holding their value better, and longer, than are Ford’s F-150 Lightnings. Over the course of 24 weeks’ data, R1Ts suffered a total price decline of only 17%, versus a 23.5% total decline in resale price for F-150 Lightnings. It’s also perhaps worth noting that resale prices of both R1Ts and R1S electric SUVs have held pretty steady over the past several months, in the fact of repeated headlines about how Tesla is about to introduce its own Cybertruck electric truck into the competition.
Long story short, it’s Pierce’s opinion that investors are underestimating Rivian’s ability to compete — and succeed — in this market. And backing up his opinion with dollar signs, Pierce is now raising his forecast for Rivian sales next year — and in every year to follow. From $4.2 billion in 2023 sales, Pierce predicts 86% revenue growth to $7.8 billion in 2024, followed by 56% growth ($12.2 billion in sales) in 2025, 44% growth ($17.6 billion) in 2026, and 56% growth again in 2027 — $27.5 billion in sales.
Among Pierce’s colleagues, rating wise, the bulls are in front. RIVN’s Moderate Buy consensus rating is based on 12 Buys, 6 Holds and a single Sell. RIVN shares are priced at $20.07 with an average target of $28.32, suggesting ~41% upside in the next 12 months. (See RIVN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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August 26, 2023 at 09:46PM
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