3 Stocks 3 Thoughts
Rivian, Carvana, and Uber all share a common trait: stocks with unattractive risk-reward profiles.
As investors navigate heightened uncertainty and management teams contend with issuing forward guidance amid numerous unknowns, several recent stock moves appear disconnected from fundamental risks. In some cases, the market is overlooking these risks; in others, there’s an unwarranted complacency about how slowing economic growth and global trade disruptions could impact business performance. Below are a few observations on three companies where recent stock price action diverges from my expectations for the trajectory of their future fundamentals.
Rivian: Miles Away from Profitability
Despite continued cash burn and a projected year-over-year decline in 2025 vehicle sales —1Q25 deliveries fell 36% — Rivian’s stock has remained surprisingly resilient amid recent market volatility. Some investors view Rivian as relatively insulated from rising tariffs due to its U.S.-based manufacturing footprint. While that may provide some protection, elevated tariffs and a weakening consumer backdrop increase the risk of lower than expected sales and higher cash burn, potentially delaying the profitability milestones required to unlock the next $1 billion investment from Volkswagen.
Rivian’s partnership and joint venture with VW bought Rivian time, helping it avoid a near-term equity raise, however this partnership doesn’t resolve Rivian’s fundamental challenges in achieving profitability. Rivian ended 2024 with $7.7 billion in gross cash and is expected to burn $3–3.5 billion in 2025, leaving approximately $4–4.5 billion at year-end (excluding the next $1 billion investment from VW). This remaining cash is barely sufficient to cover 2026 capital requirements, especially considering the $1.25 billion in debt maturing next year.
Beyond the VW investment, Rivian has also secured a $6.6 billion Department of Energy loan under the Biden administration to fund its new Georgia production facility. However, this loan faces potential risk under a Trump administration. Furthermore, like the VW investment, the DOE loan is also contingent on meeting specific profitability milestones. Consequently, Rivian may need to return to capital markets to bolster its balance sheet and fund construction of its Georgia facility, where the more affordable R2 SUV is slated to enter production in 2026. Under Rivian’s agreement with VW to receive the next $1 billion payment, Rivian must achieve either -
1) Two quarters of $50 million or greater of gross profit excluding the accounting impacts of the joint venture (the two quarters are not required to be consecutive) or 2) two consecutive quarters of $1 million or greater gross profit excluding the impacts of the joint venture.
The DOE loan has a similar requirement and an additional need to meet certain vehicle sales metrics -
The Borrower may request advances under the DOE Loan for purposes of funding certain eligible Project costs, subject to the Borrower’s satisfaction of the conditions under the Loan tranche that is designated for the relevant Block. Such conditions include the Sponsor maintaining positive gross margin for certain periods prior to the first Note A Advance, the Borrower achieving certain vehicle sales metrics prior to the first Note A Advance and first Note B Advance…
These layered contingencies—policy risk, execution hurdles, and milestone-dependent capital—underscore the uncertainty around Rivian’s future funding position. While Rivian reported a positive auto gross profit in 4Q24, this was driven by $299 million in regulatory credit revenue. In 2025, dependent upon the size and timing, regulatory credits could help Rivian meet the positive gross margin thresholds required to unlock the next $1 billion from Volkswagen and advance the $6.6 billion Department of Energy loan.
However, it remains far from assured. Higher input costs and weaker than expected U.S. vehicle sales could make it difficult for Rivian to achieve a positive gross margin, increasing the likelihood of a return to capital markets.
Even if Rivian achieves its gross profit milestones and the DOE loan remains secure under a Trump administration, the company's path to profitability remains challenging. For context, Tesla, benefiting from significant cost advantages due to its superior scale ( more than 35 times Rivian’s sales volume) and vertical integration, posted a negative operating margin in 1Q25, excluding regulatory credits, highlighting the immense scale Rivian still needs to achieve to reach sustainable profitability.
Rivian may highlight its technology credentials, but at its core, it's still a capital-intensive auto company, burning cash, and facing declining sales. Relative to Tesla, Rivian’s nearly $14 billion market cap may appear modest. But in the context of just $5 billion in 2024 revenue—and compared to Ford’s $40 billion market cap and $185 billion in revenue—it’s clear Rivian is far from a bargain.
Carvana - Growing Pressure from Consumer Credit Risk
Carvana is viewed as a potential beneficiary of higher tariffs, under the assumption that rising new car prices will drive more consumers toward the used car market. While this dynamic may support near-term demand—particularly through pull-forward effects ahead of anticipated price hikes—it overlooks the fundamental nature of Carvana’s business. At its core, Carvana operates more as a consumer finance business, with significant exposure to higher-risk, subprime borrowers. This reliance on credit market conditions introduces meaningful risk, especially in a deteriorating macroeconomic environment.
While the full impact of rising U.S. import tariffs and disruptions to global trade remains uncertain, the dual effect of what amounts to a regressive tax on lower-income households combined with broader employment headwinds will likely drive an increase in loan losses, with subprime borrowers disproportionately affected.
This pressure is emerging against the backdrop of an already elevated auto loan 60+ day past due rate for subprime borrowers of 6.6%, compared to approximately 5% during the global financial crisis—an ominous signal for Carvana’s business model. A increase in loan losses not only erodes Carvana’s ability to recognize gains on the sale of auto loans—a key driver of gross profit—but more critically, any reduction in credit availability threatens the company’s ability to meet revenue growth expectations.
While Carvana’s 2023 debt restructuring provided financial flexibility, the company has not capitalized on its surging share price to raise equity and strengthen what remains a suboptimal capital structure. For a low-margin, cyclical business with significant exposure to riskier consumers, this is a missed opportunity. Trading at a demanding valuation of 28x 2025 consensus EBITDA, the stock faces downside risk as consumer credit conditions deteriorate.
Uber - Navigating Cyclical Headwinds and a Structural Shift
Despite underperforming the market over the past year, with many investors already underweight or short the stock, Uber has proven relatively defensive during this recent period of market volatility. However, three factors are likely to drive further underperformance in the near to medium term.
Uber’s revenue outlook faces two key cyclical risks: exposure to travel and a potentially softer retail media market. Concerns around a slowdown in mobility bookings growth were evident in the reaction to Uber’s 4Q24 earnings results and guidance. Despite strong headline numbers, the company missed 1Q25 booking guidance expectations by nearly 2%, triggering a 7.5% sell-off on the day of the release and cast doubt on its ability to sustain prior growth momentum. These concerns have since been compounded by emerging signs of weakening travel trends.
Airport rides, which account for a mid teens percentage of mobility bookings, now represent a growing source of incremental risk. Combined with existing concerns—such as weakening price elasticity from higher fares and the potential plateauing of new product-driven volume gains—these factors heighten the probability of a more pronounced deceleration in mobility gross bookings growth.
In addition, Uber’s delivery business is exposed to potential weakness in retail media spend. While macroeconomic risks to the digital media market have been widely discussed, most of the focus has centered on advertising-centric platforms. Less attention has been paid to retail media, which—alongside connected TV (CTV)—has been a major driver of digital ad growth. This higher-margin revenue stream has been a meaningful factor in the improved delivery EBITDA margins for both Uber and DoorDash.
Uber’s advertising revenue run rate now exceeds $1 billion annually, with the majority stemming from its delivery business. In 4Q24, EBITDA from Uber’s mobility segment was 2.4x that of delivery, yet delivery contributed nearly 45% of year-over-year EBITDA growth—driven in large part by expanding ad revenue and strong margin improvement.
However, this ad revenue stream is vulnerable in a more challenging macro environment. A slowdown in retail media spending could pressure delivery EBITDA margins and weigh on gross bookings, leading to lower-than-expected profitability, especially as consumers become more cost conscious.
Concurrently the threat from robotaxi services remains a structural risk. As outlined in my post Mobility Market – Shifting Gears, robotaxi services are set to reshape the rideshare industry, raising terminal value risks for market leaders like Uber. The crux of this transformation lies in the shift of the industry's competitive moat from two-sided marketplaces that connect drivers and riders to the technology enablers that develop and control autonomous vehicle systems.
In the foreseeable future, the U.S. robotaxi market appears to be evolving toward an industry dominated by three or four key technology enablers, with Waymo leading the way. High technological and capital barriers to entry will hinder the emergence of most new competitors. This concentrated market structure poses a challenge for Uber, as leading operators will remain supply constrained for some time and increasingly pursue direct-to-consumer strategies that bypass third-party platforms. Waymo’s service in San Francisco, where rides are booked directly through its app, highlights this shift. Zoox, backed by Amazon, is also emerging as a contender, now active in six test locations and expected to go direct-to-consumer as well.
Waymo’s partnership with Uber in Austin and Atlanta serves as a way to accelerate Waymo’s go-to-market strategy while outsourcing fleet management to a third party. The specific financial terms of the arrangement have not been disclosed. While this collaboration makes Uber relevant in the robotaxi space, the exclusive use of Uber’s app in these cities may function more as a form of compensation to Uber than a necessity for Waymo to be on its platform. Waymo's partnership with Moove for fleet management in Phoenix and Miami further signal a flexible, multi-partner approach to scaling its operations.
Investor concern over the competitive threat from robotaxis was evident on Uber’s last earnings call, where four out of six analyst questions focused on autonomy and future robotaxi services. Against this backdrop, the risk of Uber missing mobility bookings expectations over the next couple of quarters—combined with more muted EBITDA margin expansion—skews the stock’s risk-reward to the downside. While international mobility growth may help cushion a U.S. slowdown, near-term trends in the U.S. market are likely to dominate the narrative and weigh on the company’s perceived terminal value.