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Rivian reported third-quarter deliveries of 19,248 vehicles.

Why it matters: Rivian shares were down 3% on Oct. 2 at the time of writing as the market reacted to management maintaining full-year deliveries guidance of 65,000- 70,000. The third-quarter number beat FactSet consensus estimates, so we think the market was looking for higher guidance. Rivian's third-quarter deliveries show the company is successfully ramping up production of its new R2 midsize sport utility vehicle. We expect this vehicle, priced in line with entry-level luxury vehicles, to drive much improved profitability as volumes rise.

The bottom line: We maintain our $22 fair value estimate for no-moat Rivian as the results were in line with our full-year expectations. We forecast full-year deliveries to be in line with management's guidance range, growing over 50% versus 2025. We see higher growth in 2027 as R2 production ramps. At current prices, we view Rivian shares as undervalued, with the stock trading at roughly 35% below our fair value estimate and in 4-star territory. For long-term investors, we point to rising deliveries and autonomous driving software adoption, which should drive positive adjusted EBITDA by 2029.

Coming up: Rivian is set to report third-quarter results on Oct. 29. We hope to hear an update on the timeline to get to full R2 production. We also hope to hear an update on Rivian's autonomous driving software, including when Rivian will launch its hands-free software, which will be comparable with Tesla's full-self-driving software.

Our fair value estimate is $22 per share. We use a weighted average cost of capital of around 9%.

In 2026, we forecast vehicle deliveries will come in around 65,000, up over 50% versus 42,247 in 2025. We expect US EV sales to decline in 2026 due to the expiration of the US EV tax credit in September 2025. However, we see growth for Rivian as the company launches its new midsize SUV under the R2 platform. As Rivian is ramping up production of its new vehicles, we expect automotive gross margin to be negative in 2026. However, we see gross margin turning positive in 2027 as production ramps up and Rivian benefits from scale-based operating leverage.

Long-term, we assume Rivian will successfully ramp up its Georgia production plant. We forecast deliveries will be roughly 375,000 vehicles per year in 2030, as we think the midsize SUVs will prove successful and most deliveries will come from the R2 and R3 platforms over time. We think Rivian will be successful in continuing to reduce its manufacturing costs on a per-vehicle basis. We forecast the automotive segment gross margin will remain positive after 2027 and expand to 10% by the end of the decade.

We assume overhead expenses will decline as a percentage of sales as the company benefits from operating leverage as deliveries grow. As a result, we forecast companywide operating profits will turn positive by 2030. We also forecast positive free cash flow by 2030. To fund this growth, we assume Rivian will spend nearly $15 billion in capital expenditures over the next decade.

In software and services, we assume the joint venture with Volkswagen progresses as planned and Rivian meets all milestones for investment from Volkswagen. We also assume Rivian is successful in developing its autonomous vehicle software and forecast it will be able to raise prices from roughly $50 per month today for Level 2 to $200 per month for a Level 4 version, which is in line with our forecast for Tesla’s full self-driving product. We assume Rivian will launch this Level 4 software by the end of the decade, and it drives increased adoption of its AV among Rivian drivers over time. Finally, we assume Rivian's software is successful, and the company is able to get its vehicles on the Uber ride-hailing network. Here, we assume Rivian gets a 25% share of each ride as the software provider. This boosts vehicle deliveries and adds an additional high-margin software revenue stream for the company.

We assume Rivian will need to raise an additional $2 billion in equity and debt split between 2028 and 2029 to fund expenses as it ramps up the Georgia plant.

Given the wide range of outcomes, we also model upside and downside scenarios.

Our upside-scenario fair value estimate is $50. In this scenario, we assume higher deliveries and profitability versus our base case. Additionally, Rivian’s autonomous driving software sees a higher price and higher adoption among Rivian owners. Finally, we assume Rivian sees a higher robotaxi take rate and benefits from more rides per day on average versus our base case.

Our downside-scenario fair value estimate is $5. In this scenario, we assume lower deliveries and profitability versus our base case and assume Rivian is forced to cut prices amid increasing competition. We also assume lower adoption of autonomous driving software, a lower priced software product, and no ride-hailing revenue.

We don't believe Rivian has a moat.

Rivian’s main business is producing and selling vehicles, as the automotive segment generates the majority of revenue. Vehicle manufacturing is a very capital-intensive business, with relatively low barriers to entry. To establish a moat, we would typically need to see a brand intangible asset or a cost advantage that drives returns on invested capital above a company’s weighted average cost of capital. The US auto industry is full of strong competition, making it very difficult to establish a brand that commands pricing power. We credit Rivian with entering the market with its truck and SUV products and establishing itself as a luxury automaker. The company plans to grow deliveries through its midsize SUV product, which will be in the entry-level luxury category.

Rivian is aiming to reduce its vehicle manufacturing costs over time to make its vehicles profitable. The company has recently generated a positive gross profit for its vehicles, yet is still unprofitable when including overhead costs, including selling and marketing expenses, and research and development costs. We think the company can grow sales and eventually generate profits and positive free cash flow. Yet, we see a high threat of material value destruction that precludes a moat rating. This is because the company’s success depends on its new models gaining share with consumers, which could not occur, leading to material value destruction.

In the software and services segment, Rivian’s joint venture with Volkswagen will produce electronic control units to be used in new Volkswagen electric vehicle models. We think this business will likely grow as its ability to provide central vehicle controls can allow new Volkswagen models to greatly reduce their manufacturing costs and be able to compete with low-cost Chinese EVs in the European market. We see traces of switching costs in this business, like top-tier auto suppliers. This segment also contains Rivian’s autonomous driving software. Here, we see the potential for strong success that can make the company’s vehicles more favorable with consumers and generate strong returns on invested capital over time. However, we also see the threat of material value destruction. Rivian is making a large investment in its software development, with no guarantee it will be able to develop software that is Level 3 or above, which is when the vehicle takes over driving functions for some or all of the time. If unsuccessful, this investment would lead to material value destruction.

Overall, we see traces of a brand intangible asset and switching costs. Yet, the threat of material value destruction looms if the company is unsuccessful, which leads to our no moat rating.

Rivian’s new R2 vehicle will become popular among midsize SUVs, which is the largest auto category in the US by volume.

Rivian will become profitable and generate positive free cash flow from positive operating leverage as the company ramps up production, greatly reducing unit production costs, and develops autonomous driving software.

Rivian will successfully develop autonomous driving software that will boost vehicle sales and generate strong, high-margin software revenue, including software to be used in robotaxis on the Uber ride-hailing network.

Rivian will remain unprofitable as it will face increased competition in the midsize CUV market, forcing the company to cut prices.

Rivian’s large investment to build a new factory in Georgia will prove value-destructive, as demand for its midsize SUVs will be far lower than its new capacity.

Rivian will be unable to successfully develop autonomous driving software with Level 4 capabilities, which will result in little incremental revenue or profit growth.