Rivian: Equity Issuance Priced; We Maintain Our Fair Value Estimate

Key Morningstar Metrics for Rivian Automotive

• Fair Value Estimate
  : $20.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Very High

Rivian Automotive RIVN announced its plan to sell up to 86.25 million shares at $15.50 per share.

Why it matters: The share issuance price is a more than 20% discount to Rivian’s stock price before the equity raise was announced. We think the company had to issue shares at this discount, as it is not yet profitable and generates negative free cash flow in the capital-intensive auto industry.

• The proceeds will be used to help fund the company’s growth plans in the coming years. We think Rivian will likely need to issue at least $1 billion in equity over the next few years before we forecast free cash flow turning positive in 2030.

The bottom line: We maintain our $20 fair value estimate for no-moat Rivian. At current prices, we view Rivian shares as undervalued, with the stock trading at more than 20% below our fair value estimate, which puts shares in 4-star territory.

• We raised our 2026 deliveries forecast to 65,000, which slightly increased our fair value estimate. However, as the shares will be issued at more than 20% below our fair value estimate, this is dilutive to shareholders, and we have reduced our valuation. These two changes largely offset one another.
• We see a strong growth outlook for Rivian in the years ahead as R2 production and sales ramp up, the company’s joint venture with Volkswagen for electronic control units grows, and Rivian improves its autonomous driving software.

Coming up: Rivian plans to release its second-quarter results on July 30 after the market closes. We hope to hear about the company’s plan to generate positive free cash flow, as well as an update on its autonomous driving software, where the company plans to release a Level 2 product later this year.