This Wall Street Pro thinks Rivian stock has 42% upside

Wall Street doesn’t know what to do Rivian (RIVN -3.71%) stock. The price target ranges from $14 to $19 per share. With the stock currently hovering around $13, there is either minimal near-term upside or plenty. So which one is it? An analyst recently reaffirmed his outperform rating on Rivian, reiterating confidence in its $19 price target, with 42% expected upside, the most bullish outlook on Wall Street.

Could Rivian shares really rise 42% in the next 12 months? There is reason to believe that this analyst may be right.

Expect this from Rivian over the next 12 months

Predicting the short-term direction of a stock can be difficult. But predicting what will happen from a business perspective is much more manageable. This is especially true for a company like Rivian, for whom the events of the next few years are predictable.

First, let’s recap Rivian’s current situation. On paper, the company has done remarkably well of late. In a few short years, it went from almost zero revenue to over $5 billion. It achieved this thanks to just two models: the R1T and the R1S, both luxury vehicles aimed at the higher end of the market. In many ways, Rivian’s beginnings mirror that of adzewhich first hit the market with high-priced models aimed primarily at establishing a reputation for quality and execution.

Rivian should also do what Tesla did next. After the success of its Model S and Model X variants, Tesla leveraged its new reputation and access to capital to reach the mass market with its Model 3 and Model Y variants. This transition increased revenue from Rivian’s current level to almost 100 billion dollars. Rivian expects to repeat that growth with the recently announced R2, R3, and R3X models, all of which are expected to debut under $50,000. These models should dramatically expand Rivian’s addressable market, with revenues growing rapidly in response.

TSLA Revenue (TTM) data from YCharts

The new Rivian models won’t hit the road until the first half of 2026. So next year will be pretty quiet, mostly filled with updates to production capabilities and the production schedule. But an event in the next 12 months could be a huge catalyst for the stock. It’s what makes him the most bullish analyst on Wall Street.

This catalyst could add fuel to this stock EV

A major difference between Tesla and Rivian right now is their respective abilities to generate positive gross margins. Tesla makes a profit on every vehicle it sells and has done so for years. Meanwhile, as a smaller competitor, Rivian still loses tens of thousands of dollars on every vehicle it sells. But management expects that to change soon enough. Rivian executives confirmed last month that they expect to achieve positive gross margins by the fourth quarter of 2024. Over the past year, Rivian has reduced its gross loss per vehicle to just $6,000 from $33,000. Clearing the trailing deficit would lend credibility to management and their ability to prudently manage their finances as the company ramps up spending to support new mass-market models.

Canaccord analyst George Gianarikas believes this shift to profitability will prove to the market that Rivian is not “one of the dead EVs,” giving the company enough momentum to hit sales launches of the R2, R3 and R3X. This push, he claims, will help Rivian “push, shake off the operational cobwebs and bring life to its mass market range – R2/R3; and reach scale”.

If Rivian can achieve positive gross margins this year, its outlook for 2025 and beyond will improve considerably. And when its mass-market vehicles hit the road, the company’s current $13 billion valuation may end up looking like a steal. But investors will have to be patient to see this story through.