Rivian Automotive (NASDAQ:RIVN), like different electrical automobile shares, has moved decrease not too long ago after rallying from mid-January to early February. Certain, the inventory market’s total course has a lot to do with this RIVN inventory pullback.
Nevertheless, it’s doable {that a} shift in sentiment has additionally performed a job. That’s, buyers are doubtless catching on that this electrical automobile maker faces quite a few challenges. As a substitute of being in a greater state of affairs than different early-stage EV firms, reminiscent of Lucid Group (NASDAQ:LCID), Rivian by and enormous is in the identical boat.
Dealing with a bevy of headwinds, issues right here usually tend to worsen than enhance all year long, all whereas the corporate burns by means of billions from its battle chest. With this, it’s best to imagine shares will give again current features, after which some. The aforementioned pullback could also be simply the beginning.
| RIVN | Rivian Automotive | $18.88 |
RIVN Inventory: Not a High Contender
Learn up on Rivian, and also you’ll see loads of commentary that means that this EV upstart is in a significantly better place than its rivals.
In truth, whereas extra bearish on different EV performs, analysts reminiscent of Morgan Stanley’s Adam Jonas contemplate RIVN inventory worthy of a purchase, alongside the (for now) established king of the EV trade, Tesla (NASDAQ:TSLA). Nevertheless, it’s inaccurate to deduce from this that Rivian is changing into a “Tesla killer” within the making as soon as once more.
Whereas Tesla has its personal set of considerations/dangers to remember, these pale compared to the myriad of points Rivian is presently experiencing. Manufacturing issues proceed to persist. Competitors is heating up, and never simply Tesla. Incumbent automakers are additionally slashing EV costs. In the meantime, Rivian has but to decrease its costs, after mountaineering them final March.
Apparently sufficient, these worth will increase have created one other subject: disgruntled clients. Though the corporate is honoring its prior costs for patrons who reserved earlier than the rise, it’s allegedly giving post-hike patrons precedence in relation to supply. It might be bigger and (for now) higher capitalized than friends/rivals, however Rivian is clearly not a prime contender.
What (Seemingly) Comes Subsequent
As talked about above, we could solely be within the early rounds of a critical reversal for RIVN inventory. What stays of optimism for Rivian may dissipate within the months forward, as the corporate fails to place all of its issues within the rearview mirror.
Certain, a few of these points, such because the manufacturing hiccups, may resolve inside the 12 months. Nevertheless, the competitors isn’t slowing down. Ford’s (NYSE:F) F-150 Lightning was the primary electrical truck within the U.S. throughout December. As soon as a significant RIVN investor, Ford now stands to offer Rivian a run for its cash with its in-house EV truck choices.
Buyer frustration is more likely to proceed too, except the corporate follows the lead of its rivals, and implements worth cuts of its personal. In fact, this might create a complete new set of issues. Missing the constructive money stream vital to soak up the affect of decrease costs, worth cuts would exacerbate Rivian’s money burn downside.
In flip, this is able to improve the prospect of a dilutive secondary capital elevate down the highway. Any approach you slice it, barring the emergence of some extra promising developments, there’s much more on the market to sink this inventory even decrease.
The Takeaway
Moreover doubtlessly resulting in shareholder dilution, Rivian’s money burn may create one other main unfavourable: a far decrease diploma of future progress potential.
The corporate has already delayed the launch of a lower-priced truck and an SUV mannequin, till 2026, as a way to protect money. Even when the state of affairs with Rivian improves over the following three years, it could battle to search out demand for its further choices, as by then incumbent automakers could have a lot of this market locked up.
As was the case in 2022, Rivian stays in a tricky spot, and the market is beginning to understand it. The takeaway right here is fairly clear: resist any urge to go contrarian on RIVN inventory. It might not occur instantly, however sentiment for this thus-far disappointing automobile electrification play may shift again to completely unfavourable.
RIVN inventory earns a D score in Portfolio Grader.
On the date of publication, Louis Navellier had a protracted place in F. Louis Navellier didn’t have (both immediately or not directly) another positions within the securities talked about on this article.
The InvestorPlace Analysis Workers member primarily chargeable for this text didn’t maintain (both immediately or not directly) any positions within the securities talked about on this article.
