Key Takeaways
- Volkswagen’s $5.8B investment and a $6.6B DOE loan secure Rivian’s cash flow.
- Rivian’s low P/S ratio 2.92 signals growth potential.
- EPS of -0.68 is expected for Q4 earnings
Rivian made its stock market debut with immense hype, briefly achieving extraordinary valuations. However, the excitement quickly faded as investors realized profitability was still years away. Since its IPO, Rivian’s stock has dropped 87.5%, including a 39.1% decline over the past year. Despite these struggles, recent developments indicate Rivian may be turning a corner.
Major Partnerships and Investments
Volkswagen Collaboration:
In June 2024, Rivian and Volkswagen announced plans for a joint venture to develop next-generation software-defined vehicle (SDV) platforms. Volkswagen pledged an initial $5 billion investment, later increasing it to $5.8 billion by November. This partnership brings Rivian much-needed cash flow and allows the companies to share technology while launching a new vehicle series under the name “Rivian and VW Group Technologies, LLC.”
DOE Loan Commitment:
Rivian also secured a $6.6 billion conditional loan from the U.S. Department of Energy. This funding supports the construction of a new facility in Georgia, significantly expanding production capacity. It will also help launch Rivian’s midsize platform, including the upcoming R2 SUV, designed to be more affordable and appeal to a broader audience.
Amazon Partnership: Driving Sustainability
Amazon, as part of its Climate Pledge, partnered with Rivian in 2019 to deploy 100,000 electric delivery vehicles (EDVs) by 2030. Since rolling out the vans in 2022, Rivian has delivered over 20,000 vehicles—up from just 3,000 in early 2023. This partnership highlights Rivian’s ability to fulfill large-scale orders while reducing millions of metric tons of carbon emissions annually.
Valuation
Rivian’s price-to-sales (P/S) ratio remains lower than many of its industry peers, a sign that the stock is undervalued compared to its revenue. A lower P/S ratio often indicates better value for investors, particularly when a company has growth potential. At the end of Q4 both Tesla and Lucid were hovering near P/S of 12, where Rivian was at only 2.92 showing heavy undervaluation.
This metric, combined with improving earnings per share (EPS), suggests Rivian is making steady progress toward profitability, and now that cash flow concerns are out of the way the probabilities are very high. The Q4 earnings will be announced on Feb 20 and is expected to be -0.68, big improvements from Q4 2023 of -1.57.
The R2 midsize SUV is expected to play a critical role in Rivian’s future. More affordable than the R1T and R1S models, the R2 aims to attract a broader customer base while improving margins. Analysts predict the company could achieve profitability as early as 2026 if production and sales targets are met.
Challenges Ahead
While Rivian’s recent developments have been promising, challenges remain. The company must scale production, maintain quality, and navigate potential market headwinds. However, with strong partnerships, government backing, and a growing customer base, Rivian’s prospects look brighter.
Recent Q4 delivery updates have already boosted investor optimism, pushing the stock price to $16.45. Investors will need patience, but Rivian’s long-term potential could make the wait worthwhile.
What do you think? Is Rivian truly out of the woods, or does it still have hurdles to overcome? Share your thoughts in the comments!
