Rivian Stock Prediction 2025: Is Potential Valuation Justified?

Rivian is one of the most-awaited IPOs this year. While the company filed for an IPO recently, market participants have been speculating about it for months, including its potential valuation. On Oct. 1, Rivian filed an S-1 document with the SEC. As the company inches closer to listing, investors want to know how it might perform in the long term. What is Rivian's stock price prediction for 2025?

Rivian also became the first EV company to start delivering an electric truck commercially. The company started its deliveries in September and beat many competitors, including Tesla. The early reviews for R1T are good. Rivian is expected to start producing the R1S SUV in December.

The company aims to trade on the Nasdaq under the ticker symbol "RIVN." Rivian hasn't scheduled its IPO or set the terms yet. There are many factors that companies consider before their listing date, including market sentiment. Therefore, it's difficult to assess the timing of its listing. According to Rivian’s IPO documents, the company is seeking a potential valuation of $80 billion.

Rivian has already raised $10.5 billion in funding. It has some high-profile investor backing with the likes of Amazon, Ford, Cox Automotive, Blackrock, Fidelity, and T. Rowe Price. It also has an order from Amazon for more than 100,000 electric vehicles within 10 years. This includes 10,000 vehicles by the end of 2022. As of June 30, Rivian had 48,390 pre-orders for the R1T pickup and R1S SUV.

Rivian doesn’t have any material revenue and is expected to realize its first revenue in the fourth quarter of 2021. However, its net losses widened to $994 million in the first half of 2021 and to more than $1 billion in 2020 from $426 million in 2019. The losses expanded as the company built its factory in Normal, Ill., and it started producing its R1T pickup truck and R1S SUV. The company’s R&D expenses are ramping up and are projected to increase going forward.

Rivian is also following its biggest competitor, Tesla, in vertical integration. The company is designing, producing, and selling its vehicles on its own. Unlike many new startups that are teaming up with electric charging companies, Rivian is building its own charging stations.

Rivian sees the lifetime revenue opportunity from each vehicle from software services alone to be between $10,000 and $15,500 for the autonomous driving feature. Tesla is also trying to justify a large part of its humongous valuation due to these recurring revenue streams.

Rivian also expects another $8,700 and $3,500 from insurance and financing and service features for each consumer vehicle. Through all these services combined, the company is expecting to make about $68,000 from each vehicle over its lifetime.

The only other company that comes close to following Tesla and Rivian’s approach in "doing it all by itself" is Lucid Motors, which went public a few months ago. While the target segments within EV for Rivian and Lucid are quite different, Lucid is the best proxy that we can use to estimate valuation multiples for Rivian, given the similar industry background, stage in business, and business models followed by each.

Currently, Lucid Motors is trading at a price-to-2025 sales multiple of 2.7 times. If we apply a similar multiple to Rivian on a valuation of $80 billion, the company should have sales of $30 billion by 2025. Similarly, the revenue-to-2025 EBITDA multiple for Lucid comes out to be 22 times. To justify a valuation of $80 billion, Rivian will have to deliver an EBITDA of $3.5 billion by 2025, applying Lucid’s multiple. That’s far easier said than done.

Remember how Tesla had to go through production hell as far as execution is concerned? The market might be overestimating Rivian’s prospects currently. It has the potential to challenge Tesla. However, there's still a lot that needs to be done by the company before its proposed valuation starts to make sense from a logical standpoint.