Should I buy Rivian stock as Tesla’s allure fades?

Tesla saw sales fall over the past year and investors might be wondering why the stock is so expensive. Maybe Rivian stock represents a better option?

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Rivian (NASDAQ:RIVN) stock has fallen from highs around $179 to just $10.27 at the time of writing. The underperformance has been significant and reflects the company’s non-delivery on promised growth.

However, as investors mull why Tesla is trading at 58 times forward earnings — it’s incredibly expensive for a company that’s currently in reverse — should we start looking at Rivian instead?

What Wall Street says

When I’m assessing how much a stock should be worth, one of the first places I look is the share price targets. These are ratings provided by analysts and they provide a good insight into what the stock should or could be worth.

In the case of Rivian, the average share price target is $17.58, representing a 71.6% premium to the current share price. That’s a very good sign. It’s worth noting that Tesla tends to trade very close to its share price target.

Rivian stock has 11 Buy ratings, five Outperform ratings, 10 Hold ratings, one Underperform rating, and one Sell rating. Despite this bullishness, it’s worth recognising that share price targets are not always updated as frequently as we might expect. Some can be outdated.

Not much better over here

While things might not look great for Tesla right now, it’s not much better with Rivian. It delivered much stronger growth than Tesla during 2023. But as Tesla went backwards, it wasn’t overly hard to do so.

In 2023, the Irvine-based company delivered 50,122 vehicles and brought in $4.4bn in revenue, which is more than double what it achieved in 2022. Overall losses narrowed in 2023 to $5.4bn, down from $6.7bn in 2022.

However, there are several issues, including margins. In the fourth quarter of 2023, Rivian’s gross margin was -46%, meaning it lost money on every vehicle sold. This margin equates to a staggering $43,372 per vehicle delivered.

The margins actually got worse towards the end of the year, although it’s worth noting that $43,372 was an improvement from a $124,162 loss per car in Q4 of 2022.


Perhaps the most concerning thing is that Rivian produced 57,232 vehicles in 2023, and it only plans to produce 57,000 in 2024. Actually, the company’s Q4 production rate was the equivalent of 70,000 vehicles per year. So, management is slowing production!

The company pointed to economic and geopolitical challenges, notably high interest rates, as a reason for pulling back output guidance.

The bottom line

Rivian isn’t expected to reach break-even until 2029. That’s a long way away, and it’s currently burning through capital at a fast rate. It ended the fourth quarter of 2023 with $9.4bn in cash, but given its burn rate, I’d expect to see it have liquidity issues towards the end of 2025. This means raising more cash or diluting shares.

Rivian isn’t my EV pick!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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