Just a year ago, Rivian Automotive (NASDAQ:RIVN) stock was flying high.
Trading for more than $100 per share, RIVN was considered one of the most promising vehicle electrification plays out there.
It was also among several companies considered to be in the running to supplant Tesla (NASDAQ:TSLA), and become the top dog among EV companies (aka a “Tesla killer”). Flash forward to now, however, and it’s clear the buzz that once surrounded Rivian has long since left the room.
RIVN has dropped around 79% over the past twelve months. Like with other would-be “Tesla killers,” such as Lucid Group (NASDAQ:LCID), a combination of changing economic conditions, and company-related setbacks, are to blame.
Similar to the situation with Lucid, now is also not an ideal time to buy this stock. A recent development could signal more trouble ahead.
| RIVN | Rivian Automotive | $24.54 |
The Rise and Fall of RIVN Stock
Debuting at $78 per share in November 2021, in hindsight, there was likely too much future potential baked into Rivian’s valuation. Investors were willing to give the company a $66.5 billion valuation right off the boat, simply because of its potential to become the “next Tesla.”
Far from slumping after going public at this aggressive price, RIVN stock hit triple-digits within its first day of trading, and within a few days traded for as much as $172 per share. Yet not too long after hitting such lofty price levels, Rivian shares began a steady decline to substantially lower prices.
At first falling below its IPO price, as the Federal Reserve began fighting inflation with interest rate hikes (which put pressure on growth stock valuations), issues such as a slower-than-expected ramp-up in production began to push RIVN even lower.
Shares during that time were also briefly under pressure due to insider selling by early investors, such as Ford (NYSE:F) and Amazon (NASDAQ:AMZN).
RIVN has essentially traded sideways since the spring. The market has reacted more positively to the company’s reaffirmation of its scaled-back production targets. That said, a new wave of disappointment may be just around the corner.
The Latest News May Spark Another Pullback
On Dec. 12, Rivian announced that its previously-announced plans to team up with Mercedes-Benz’s (OTCMKTS:MBGYY) van division to build and sell electric vans in Europe has been put on pause. This walking back of prior expansion plans is already having an impact on RIVN stock, but a further pullback may be in store.
Rivian is much better capitalized compared to other EV startups. As of Sept. 30 the company had a cash position of around $14 billion. However, conserving this war chest is a high priority as the company burns through cash.
Rivian said its new plan is to focus on making its U.S. business (commercial vans, plus trucks for the consumer market such as the R1T) profitable, before pursuing opportunities such as the aforementioned joint venture. This may be a responsible move to make, but there’s another way of looking at this.
It’s hard to prove, yet it’s possible that Rivian is walking back its expansion plans because the path to profitability is far murkier than current sentiment suggests. This would likely drive another sell-off for the stock.
Bottom Line on RIVN
With net reservation numbers rising last quarter, and the company re-affirming production targets, it may seem odd to think that a spate of bad news is in Rivian’s future.
Yet with a 2023 recession appearing increasingly certain, it’s hard not to see this EV contender starting to experience similar demand issues as peers Tesla and Lucid.
Not only that, competition from “old school” automakers is heating up. Incumbent automakers are themselves ramping up electric truck and commercial vehicle production. The F-150 Lightning, built by Rivian’s former partner Ford, just won MotorTrend’s “Truck of the Year” award.
After a few quarters of satisfactory results and production updates, bad news may await in 2023. Ahead of shares potentially falling further in the months ahead, bailing out of RIVN stock may be the best move.
RIVN stock earns a D rating in Portfolio Grader.
On the date of publication, Louis Navellier held positions in AMZN and F. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.