Why Is Wall Street So Bullish on Rivian? Here's the $1 Trillion Reason.

Key Points

• Tesla -- the pioneer of EV makers -- has seen its valuation rise to $1 trillion.

• Its upstart rival, Rivian Automotive, is preparing to replicate that success.

• 10 stocks we like better than Rivian Automotive ›

The average price target among Wall Street analysts for Rivian Automotive (NASDAQ: RIVN) stock is $14.72 per share. That suggests around 16% in additional upside potential over the next 12 months.

Some analysts, however, are even more bullish. This week, Evercore analyst Chris McNally reiterated his "buy" recommendation on the stock, with an $18 price target. That's nearly 40% in potential near-term upside!

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What is making analysts so bullish? The answer is a $1 trillion opportunity.

Who will be the next Tesla?

When it comes to electric car stocks, Tesla remains king. Its market capitalization sits at roughly $1 trillion. Rivian, meanwhile, is valued at just $16 billion -- less than 1% of Tesla's size.

There's a lot bundled into Tesla's market value. It has, for example, a distributed energy business that few (if any) competitors can match. Plus, it has a fledgling robotaxi division that some analysts think will be a $1 trillion opportunity on its own.

But the bulk of Tesla's revenue and profits today still come from manufacturing EVs. That makes Tesla's valuation a north star for nearly every other EV maker. With the right growth strategy, Tesla has proven that a $1 trillion valuation is possible.

Image source: Getty Images.

How close is Rivian to achieving a $1 trillion valuation? On paper, the company is years, if not decades, away. But the right pieces are being put into place. Early next year, the company will begin producing three new vehicles -- all priced under $50,000. We also got news this week that Rivian is making progress on its Georgia plant, which will support massive scaling of these new models.

When Tesla released its affordable vehicles -- the Model Y and Model 3 -- sales skyrocketed. Today, those two models account for more than 90% of its vehicle revenue. Rivian has the chance to replicate this success over the next three years: the biggest reason Wall Street remains so optimistic.

Should you invest $1,000 in Rivian Automotive right now?

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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.