What Tariff Relief Hopes Mean for Rivian Stock After Recent Swings

Trying to figure out what to do with Rivian Automotive stock in this market? You're not alone. This EV maker keeps popping up in conversations, whether about the promise of electric trucks or the reality checks facing every innovative automaker right now. If you’re feeling a bit whiplashed by the numbers, here’s a rundown: Over the last year, Rivian’s stock has climbed 30.7%. Zoom out to the three-year mark and it’s down an eye-popping 59.8%. Volatility, anyone? In just the past week, the stock dropped 12.4%, with a 5.5% slide for the full month. It has been far from a calm ride, even by growth-stock standards.

There’s no shortage of headlines swirling, either. On one hand, Rivian is dealing with the very real challenge of redesigning its R2 door handles after safety concerns. Industry-wide EV sales could slow further now that hefty federal tax credits are gone. On the other hand, whispers of auto tariff relief from Washington might eventually help all U.S. carmakers. That is the kind of policy chatter that can spark big moves, both up and down.

But what about Rivian's underlying value? Right now, its valuation score is 0 out of 6, which means the stock does not appear undervalued by any of the standard checks most analysts use. Still, there is more than one way to assess value in a company like this. Up next, we’ll dig into those methods before revealing an even better perspective at the end.

Rivian Automotive scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Rivian Automotive Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model works by projecting a company's future cash flows and then discounting them back to today's value to estimate what the business is fundamentally worth right now. For Rivian Automotive, this analysis provides a glimpse into how its financial future might unfold.

Currently, Rivian's most recent twelve-month Free Cash Flow stands at negative $1.21 Billion. Over the next five years, analysts forecast continued negative cash flows, but with gradual improvements. By 2029, Free Cash Flow is projected to turn positive at $961 Million, and by 2035, the model anticipates FCF reaching around $3.7 Billion, based on extrapolations beyond the analyst estimates. All cash flows are reported in USD and reflect a scenario where Rivian ramps production and curbs expenses as it matures.

After discounting these future cash flows to the present, the estimated intrinsic value per share is $12.70. Right now, this suggests the stock is about 7.4% above its DCF-calculated fair value, making it slightly overvalued, though the margin is slim enough to call it close.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Rivian Automotive.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Rivian Automotive's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Rivian Automotive Price vs Sales

For companies that are not yet profitable, such as Rivian Automotive, the Price-to-Sales (PS) ratio becomes the preferred metric for valuation. This approach is especially useful because it allows investors to focus on the company’s revenue base rather than profits, which can be negative or volatile during growth phases.

Growth expectations and risks play a big role in determining what a “normal” or fair PS ratio should be. Companies with higher growth prospects or perceived lower risk tend to justify a higher PS ratio. Conversely, if market risks are elevated or future growth is uncertain, a lower multiple may be more appropriate.

Today, Rivian’s PS ratio sits at 3.22x. For context, that is substantially higher than both the auto industry average of 1.38x and the peer average of 1.63x. However, simple averages can be misleading, which is why we also look at Simply Wall St’s proprietary Fair Ratio. This Fair Ratio, at 1.42x, is calculated taking into account Rivian’s specific factors such as projected growth, profit margins, risks, overall industry conditions and the company’s market cap. This makes it a more tailored benchmark than broad industry or peer comparisons.

Given the Fair Ratio of 1.42x versus the actual PS ratio of 3.22x, Rivian stock currently appears overvalued by this measure.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Rivian Automotive Narrative

Earlier we mentioned that there’s an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple yet powerful tool that lets you tell your own story about a company by linking your expectations for its future revenue, margins, and earnings directly to a fair value estimate. This approach offers more than just plugging numbers into a model.

With Narratives, you connect the dots between where you see Rivian headed and what you think its shares are really worth. Narratives make investing accessible by helping you build a personalized viewpoint that reflects your perspective and allowing you to quickly compare it to other investors, all from the Community page on Simply Wall St's platform (used by millions).

What makes Narratives truly dynamic is that they stay up to date automatically whenever new information, such as fresh news or quarterly results, reaches the market. This means you can check your Narrative, see if the current share price is higher or lower than your fair value, and decide smartly when to buy or sell.

For example, with Rivian Automotive, some investors believe in rapid EV adoption and profitable vertical integration and set fair values as high as $21, while cautious ones factor in continued losses and see fair value closer to $7.55. Narratives capture these different stories with numbers, so you can pick the one that fits your outlook.

Do you think there's more to the story for Rivian Automotive? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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