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Rivian Challenges Tesla in EV Market, Stock Reportedly 'Poised' for Remarkable Rally

Rivian's R1T electric truck and R1S SUV, competing with Tesla's EV lineup.

Recent corporate changes may make Rivian, Tesla's younger rival, the future winner. Admittedly, the company is currently trading almost 90% lower than its high. However, the company's improving prospects may soon win over Wall Street and send the stock skyrocketing.

Rivian's Strategic Moves and Market Expansion

Challenging Tesla directly is a daunting task, as Ford Motor Company and General Motors are discovering. Rivian is a relatively new EV company with a few variants available. Its light-duty pickup vehicle (R1T) and SUV (R1S) receive the majority of the attention, as per Yahoo Finance.

They compete with Tesla's Cybertruck, Model X, and Model Y. Rivian's first notable corporate success occurred when the company partnered with e-commerce behemoth Amazon to manufacture electric commercial trucks.

Rivian has created approximately 10,000 vans for Amazon's fleet, with an agreement in place to construct a total of 100,000 for Amazon by 2030. This delivery van production relationship was initially limited to Amazon, but Rivian declared last fall that it was ready to begin selling its EV commercial van to the general public. AT&T, the telecom giant, revealed in December that it had ordered the vans and will begin incorporating them into its fleet this year.

It's exciting for two reasons. First, Rivian now has access to a corporate customer base that is primarily looking for ways to reduce carbon emissions, and fleet-heavy businesses may consider using Rivian's vans to do so.

Second, while Tesla is active in the larger vehicle sector, it does not yet have a commercial van and has not announced one. This is an obvious niche that Rivian can fill as it expands its manufacturing capacity and strives for profitability.

Operating automobile and truck factories is quite expensive. Every vehicle manufacturer faces a big challenge: producing enough units to cover their costs while still making a profit. So far, Rivian's factories have constantly burned cash, although quarterly losses began to improve in Q2.

If the Q3 cash burn is annualized, it equates to $4 billion in cash losses. Rivian has more than $9 billion in cash on its balance sheet, which is enough to fund its operations for two years at that rate. Ideally, losses will continue to decrease as Rivian increases production.

As long as Rivian's financials continue to improve, the stock should get additional traction on Wall Street. While free cash flow may not precisely equal bottom-line profits, it demonstrates that a business is sustainable and may offer investors greater confidence in Rivian's future.

Financial Forecast, Investment Potential of Rivian Stock

The stock is still almost 90% down from its previous high in late 2021. The market was extremely frothy at the time, so investors should not expect a new high anytime soon. However, this does not mean that shares are without promise.

Rivian's stock is being handled as if it were a corporation that was burning cash. That treatment is justified for now. Assuming Rivian's expansion continues, and the commercial van is a fantastic prospect for this, cash losses should continue to fall. If Wall Street realizes that Rivian is on a solid route to profitability, the stock's valuation could rise.

Add in the naturally occurring revenue growth that will occur in the background over the next few quarters, and the combination could result in outsized investment returns as Rivian gains popularity among investors. Rivian is significantly less proven than Tesla, but sometimes going against the grain yields the best financial opportunities.

However, the Motley Fool Stock Advisor analysis team has recently highlighted what they feel are the ten greatest stocks for investors to buy now. The Rivian Automotive was not one of them. The ten equities that made the cut might provide massive gains in the next years.

Photo: Clayton Cardinalli/Unsplash

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