Rivian Stock’s Epic Streak Snapped. Here’s What Happens Next.

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All good things come to an end and Rivian’s incredible winning streak is over. More volatility could be ahead, but now investors can focus on fundamentals.

Shares of

Rivian Automotive

(ticker: RIVN) fell 2.6% Tuesday, closing at $24.85, while the

S&P 500
and

Nasdaq Composite
rose 0.7% and 0.6%, respectively.

Coming into Tuesday trading, Rivian shares were up for nine consecutive days. That was a record for the company, which began publicly trading in November 2021, according to Dow Jones Market Data. Shares rose 90% during the streak, which is also the best nine-day stretch for the stock ever.

Shares started rising late in June, but deliveries really kicked things into high gear. Rivian, which produced 9,395 vehicles in the first quarter, announced second quarter production of 13,992 units on July 3. Wall Street expected roughly 11,000. Shares rose roughly 17% in response.

Better production was a catalyst for Wedbush analyst Dan Ives to increase his target price for Rivian shares to $30 from $25 a couple days later. He rates Rivian stock Buy. Shares rose 14% that day.

With the streak broken, investors can think about what is next. Earnings are coming and better-than-expected deliveries should mean better-than-expected sales and smaller losses. Wall Street currently projects a $1.43 per share loss from about $1 billion in sales.

Rivian isn’t expected to produce full-year profits for years.

Tesla

(ticker: TSLA) didn’t produce consistent profits and cash flow until it was making cars at a run rate of roughly 400,000 per year.

A solid quarterly report is probably baked into the Rivian stock price now. Investors would probably like to see production guidance rise. Rivian currently projects 50,000 units of production in 2023. If the company simply repeats the Q2 number in quarters three and four it will make more than 51,000 units. Eventually, the company’s plant in Normal, Ill., is expected to produce 150,000 units a year, so increasing production in Q3 and Q4 is a reasonable bet.

Will it be enough to boost the stock though? Shares are down about 86% from an all-time closing high of $172.01 reached on Nov. 16, 2021. Just looking at that indicates investors could expect more upside.

No one, however, really expects a repeat of 2021 EV euphoria. Today, the value of Rivian, including its cash balance, is roughly $23 billion. Wall Street’s average price target of about $24 dollars a share indicates that analysts think the stock is fairly valued.

But analysts also valued the stock at north of $100 shortly after the November 2021 IPO. Investors need a better way to value the stock.

At current prices, Rivian shares trade for roughly three times estimated 2024 sales. Tesla stock trades for roughly eight times estimated 2024 sales. There is no reason Rivian’s price-to-sales multiple should match Tesla’s. Rivian isn’t generating free cash flow yet. Tesla is. But Tesla’s multiple is something Rivian investors can reference when evaluating the EV startup.

If Rivian production keeps beating estimates and the company keeps executing then shares will keep rising, closing the valuation gap with Tesla. Eventually, Rivian stock will be valued on earnings and free cash flow, just like shares of any other company. Those days are still a ways down the road.

Write to Al Root at allen.root@dowjones.com