Is Rivian a Buy Below $12? Let's Dive Into the Risks and Rewards

Let me cut to the chase: Rivian (RIVN) has been a rollercoaster for investors since its IPO. The question of whether to buy the stock while it’s hovering near $12 isn’t just about price—it’s about understanding the company’s potential, its hurdles, and whether the market is pricing in too much pessimism or optimism. Let’s unpack this.

The Current Price Context

First, let’s get real: Rivian’s stock has been a disaster for most shareholders. After soaring to over $78 in late 2021, it’s now trading near $12—down roughly 85% from its peak. That’s brutal. But here’s where the "value trap" vs. "value opportunity" debate begins. Is this a sign of permanent decline, or a chance to buy a disruptor at a discount?

Looking at the numbers, Rivian’s freefall has outpaced even the broader EV sector’s struggles. While Tesla and Ford have stabilized or risen modestly, Rivian’s shares have cratered. But context matters: Rivian is a fraction of Tesla’s scale, and its cash burn and production delays have spooked investors.

The Risks: Why This Could Get Worse

Let’s start with the bad news. Rivian’s cash position is precarious. As of Q3 2023, it had around $3.2 billion in cash, but it’s burning through roughly $1 billion per quarter. That math doesn’t last long unless it turns a corner—fast.

Then there’s competition. Tesla’s Cybertruck is now in production, Ford’s F-150 Lightning is eating market share, and startups like Lucid and Lordstown are nipping at Rivian’s heels. Oh, and don’t forget traditional automakers like GM and Toyota, which are pouring billions into EVs.

Supply chain issues also loom large. Rivian relies on lithium, chips, and battery cells—commodities that are volatile and prone to shortages. One hiccup in production could send shares tumbling further.

The Opportunities: Why Bulls Are Optimistic

Now, let’s flip the script. Rivian has two massive tailwinds: the EV boom and government incentives. The Inflation Reduction Act offers up to $7,500 in tax credits for eligible Rivian vehicles, which could boost demand. Plus, its R1T truck and R1S SUV are top-tier products with loyal fan bases.

Production growth is another key metric. Rivian’s goal is to hit 25,000 annual deliveries by mid-2024, up from 24,330 in 2022. If it meets that target, margins could improve. And don’t sleep on its commercial division: Rivian’s deal with Amazon for 100,000 delivery vans is a potential cash cow if it can scale production without delays.

The Data Speaks: Is $12 a Bargain?

Let’s crunch some numbers. Rivian’s market cap is now around $4.5 billion—lower than its cash on hand. That’s unheard of for a company with its ambitions. But market cap isn’t the same as valuation; investors are pricing in a high risk of failure.

Revenue-wise, Rivian generated $1.3 billion in 2022, but it’s not close to profitability. Its Q3 2023 revenue was $1.3 billion, with a net loss of $1.4 billion. To survive, it needs to slash costs, boost deliveries, and secure more partnerships.

Analyst sentiment is mixed. While some downgrade the stock for cash concerns, others point to its long-term potential. Morgan Stanley recently called it a "buy" at $12, citing undervalued assets, but Goldman Sachs remains cautious.

The Verdict: Proceed With Extreme Caution

Here’s my take: Rivian is a high-risk, high-reward play. At $12, it’s dirt-cheap relative to its assets and potential, but there’s no guarantee it can execute. If you’re a long-term investor with a high risk tolerance, a small position could pay off if Rivian hits its production targets and scales profitably.

However, the odds are stacked against it. The EV market is flooded with competition, and Rivian’s burn rate leaves little room for error. I’d advise waiting for clearer signs of progress—like consistent quarterly deliveries, cost reductions, or a new product pipeline—before jumping in.

In conclusion, Rivian at $12 isn’t a "buy" for everyone. It’s a speculative bet on a company that’s still proving itself. If you’re all-in on EVs and willing to stomach volatility, maybe take a tiny slice. But for most, this is a "watch and wait" situation. The road ahead is rocky—investors need to decide if they’re ready to tackle the cliffs.