Founded in 2009, Rivian Automobile specialises in electric trucks and SUVs. The company got people fully talking in 2021 when it went public as interest in the EV industry grew. While the EV maker has made a name for itself as a company with innovative products, Rivian stock price isn't exactly encouraging for both early and potential investors.
The stock price has been going in one direction since the launch in November 2021 and has been anything but a winner. Therefore, under the pressure of the ever-competitive EV market and rising challenges, it is important to ask: is Rivian stock a buy right now? Here are a few reasons why there might still be hope for Rivian and how to exercise caution if you want to benefit from its upside.
Analysis of Rivian Stock
After it was founded in 2009, the company raised billions from individual investors and corporations like Amazon and Ford in exchange for a stake in the company. By November 2021, Rivian (NASDAQ: RIVN) was valued at $85 billion after raising $12 billion through its initial public offering. Rivian also enjoyed $1.5 billion in subsidies and investments from the state of Georgia which is the largest subsidy ever given by the state.
Rivian went public in November 2021 with its stock trading at $78 per share but is currently trading at a quarter of its share price. Dropping 87% since its IPO, Rivian has been on a steady decline mostly due to economic factors outside its management's control. By April, Rivian declined by 10% and is now trading at $12 per share, an all-time low. The company's market capitalization also took a massive hit, falling to $11.13 billion with 913 million outstanding shares.
While Rivian still has a promising future, the experts on Wall Street advise caution when investing in the EV maker. Rivian's share price continued to drop as news indicated that the company has lost the $7,500 tax break for its vehicles. Rivian stock forecast has received mixed opinions with some predicting that it will increase at the end of the year and others expecting it to remain the same.
However, Rivian is not the only EV company experiencing issues. Most of the EV companies are experiencing a slump lately and price forecasts have been a bit cloudy and uncertain. Tesla stock dropped by close to 80% in 2022 and Nio has been in a steady decline for a while, now trading at $9 per share. Lucid Group shares also dropped by 5.65% in April 2023 trading at $7.19. However, Tesla is starting to pick up once again but its shares took another hit after its investor day when news of its new factory was announced. As for Nio, the EV maker is experiencing similar problems to Rivian as it hasn’t made any significant profits along with a poor revenue outlook.
Characteristics of Rivian stock
Rivian might have gone public at the worst time just when news of inflation and a slow economy were starting to circulate and cause doubts. While it held its own in 2021 and closed the year at $103.69, it is now marked by high volatility and risk. So far, it has lost more than half its value and is now mostly considered a bearish stock for the foreseeable future.
As a relatively new company in the EV space, Rivian has made some costly mistakes and the company’s stock has suffered because of it, especially after increasing the price of its vehicles. When increasing the price of its R1T pickup truck by 17% and R1S sports utility vehicle by 20%, it neglected to exclude those who paid before the increase causing a wave of anger and cancellation of orders.
However, the stock still remains relatively active with an average trading volume of 29 million as traders are trying to benefit from the rapid price movement.
Driving Factors for Rivian Stock Today
Although Rivian has had zero positive returns since it started production of its trucks and is gradually regarded as an overhyped company, it still holds the attention of likely investors hoping to see what happens next when the EV market as a whole overcomes its issues. So, it is a good idea to consider the driving factors that affect the short-term and probably long-term performance of the company.
1. Economic Conditions
As an emerging company, Rivian is struggling with inflation, a weak economy, and falling cash reserves combined with the possibility of an industry price war. The company already laid off hundreds of workers in 2022 to maintain profitability and plans to lay off 6% of its current workers to cut down costs.
2. Industry Trends
The automotive industry as a whole is plagued with supply and production issues. This problem mostly affected relatively new companies like Rivian that did not have the infrastructure or connections in the industry to weather the disruptions. Due to the industry disruptions, the company experienced a production slump, delivering about 25,000 vehicles in 2022 instead of the 40,000 vehicles analysts predicted.
3. Government Policies
The US government has been supportive of the EV industry granting incentives and subsidies to encourage the production of more cars and make them more attractive to customers. Rivian has also been a beneficiary of $1.5 billion in subsidies and incentives from the state of Georgia. Plus, despite missing vehicle production numbers and losing billions of dollars, the state is still committed to supporting Rivian in hopes of getting a meaningful return on its investment. However, there is still a long way ahead before Rivian is profitable, especially after being left out by the new $7,500 tax break that would have helped with the production and sales of its cars. The company has already started working on getting its vehicles recognized for the tax credit and expects it to happen in a couple of months.
4. Company performance
Rivian hasn’t been able to live up to expectations since it went public. But the one thing going well for the company is its ability to ramp up production and it is important to remember that it is still an early company. Rivian management promises to meet the goal of producing 50,000 vehicles in 2023 which will set the company apart from other small EV companies and gain it some traction.
For now, the company is also focusing on cutting down costs and its revenue jumped in Q4 of 2022 to $663 million. And Rivian isn’t short on demand either. Its major client and investor Amazon has a pending order of 100,000 vehicles that Rivian has started delivering and its customer preorder extends to 2024.
How to Profit from Rivian
Rivian is yet to live up to the hype but with backing from Ford and Amazon, many are torn about Rivian’s future. But before you invest, it’s time to weigh the pros and cons of investing in Rivian.
Pros
Volatility: Rivian is a very volatile stock and will continue to be volatile for a while. The company’s profitability is in question and there is doubt that it will be able to keep up with the competition and the pressure of the price cuts done by Tesla and Ford. Current Rivian stock price forecast by analysts puts its average 12-month share price at around $26.11 meaning that there are a lot of opportunities for investors to make a profit. For now, there is no Rivian stock dividend given to investors but this may change when the company becomes profitable.
Although the current volatility might not be the best for investors with a low-risk tolerance, traders, especially scalpers, and day traders, can use Rivian to protect their portfolios from short-term fluctuations while making a profit.
High Demand: The global EV market is expected to be worth $824 billion by 2023 and Rivian also benefits from the massive demand for EVs. The company has a customer pre-order backlog of 98,000 units and plans to increase production capacity to meet up the demand. The company also has $15.5 billion in cash, so there is enough money to finance its projects for the foreseeable future.
Big Backers: Amazon and Ford are among the first investors for Rivian along with other companies such as Franklin Resources Inc and Blackrock Inc. The interest of these companies in Rivian is one of the major reasons why it receives a lot of hype to this day.
Cons
Valuation: On its third trading day, Rivian was valued at more than $100 billion making investors question why the company was more valuable than legacy automakers like General Motors and Ford. It typically takes a while after an IPO for the company to get the right valuation, therefore raising doubts about the ability of the company to compete with other automakers.
Though it was the first to deliver an electric pickup truck to the market, it hasn’t lived up to expectations.
Startup troubles: In 2021, the automaker had an issue keeping down costs as it burned through nearly $3 billion and only delivered 920 vehicles. There were also management issues after its former vice president of sales and marketing sued the company for firing her unjustly. In the second quarter of 2022 alone, Rivian suffered a net loss of $1.7 billion and ended the fiscal year with a negative $5 billion.
Competition: Rivian’s “adventure” vehicles have a specific target audience and will face tough competition from Ford, Tesla, and General Motors. Having only two models, the R1T pickup truck starting at $67,500 and R1S SUV which starts at $70,000 it will have trouble against similar vehicles like GM’s electric Chevy Silverado that sells at half the price.
Investment strategies for traders
These are strategies you can use to invest in Rivian:
Long-term holding: Compared to smaller EV companies, Rivian is doing relatively well and its stock is relatively cheap making it easier to invest long-term in the company. However, the recent vehicle recalls, failure to meet its production targets, and volatility could be problems that persist in the future.
If you want to invest long-term in Rivian, it is advisable to have a good risk appetite and confidence in its potential. Also, do not go all-in at once until it makes considerable improvement in resolving its issues.
Short-term CFD trading: Rivian Automotive is not profitable yet but it doesn’t have to be to make a profit from CFD trading. You can take advantage of both its falling and rising prices. For instance, if you think the share price is going to rise, you can go long but if you believe it is going to fall, you can go short.
Tips for Trading Rivian
Rivian is a high-risk investment and it is important to go in with all the necessary information and tools at your disposal.
To make informed trading decisions about Rivian you can:
Analyse stock price history, industry, and market trends: Before you invest, conduct a Rivian stock analysis and weigh its performance against the current market condition and similar EV companies. Though it is touted to be a Tesla killer, comparing it to Tesla, Ford, and General Motors at the moment may not give you an accurate representation of its potential because these are much bigger companies with better infrastructure.
Financial statements and news: Remember to research the latest financial statements about the company before you trade or invest. You can easily find Rivian stock news on well-established sites like Bloomberg, CNBC, Seeking Alpha, and Reuters. This helps to sift through the noise and decide if it is the right fit for you.
Think in the context of your investment portfolio: Consider the investments you already have and how Rivian fits into it. If you have a diversified portfolio, putting a little money into the EV maker is a good idea. But if you have a traditional low-risk portfolio or Roth IRA, adding Rivian might upset the balance of your portfolio.
How to Trade Rivian with VSTAR
VSTAR is a globally regulated CFD broker offering over 1000 financial instruments with account protection and the lowest trading fee. To trade Rivian stock CFD with VSTAR, you should:
1. Learn the difference between trading and investing
Although these two terms are often used interchangeably, they are not the same thing. Investing is a long-term strategy with lesser risk. Returns are earned over months or years and investing requires intense research before making a decision. On the other hand, the purpose of trading is to make profits from the short term using trading systems and technical indicators like price charts. So if you want to trade Rivian, it is important to come up with an effective Rivian stock buy or sell strategy that allows you to move in and out of the market easily.
CFD is an example of trading because you profit from the short-term price movement. When trading Rivian CFD, you can easily benefit from the use of leverage and reduce potential risks to your investment portfolio by opening a short position. For example, if you think the Rivian share price is going to increase, you can open a long CFD position . In this case, you buy 100 CFDs on Rivian shares at $12 per share bring the value of the trade to $1,200. If it increases to $15, you’ll make $3 per share and $300 in profit.
But let’s say you expect Rivian shares to drop and decide to open a short CFD position. You open a position selling 100 RIVN CFDs at $12. If the price does fall to $10 and you are able to close your trade at this price, you will make $200 as profit or $2 per share.
2. Practice with the VSTAR demo account
Practicing with VSTAR’s demo account helps you improve your skills at zero risk. You can still execute trades on real-time data and trade with as much as $100,000 to see how well you can manage a sizable investment.
3. Build your own trading strategy
Take time to perfect a flexible trading strategy that suits your needs and trading style. The strategy should expressly spell out what to do and how to manoeuvre unexpected situations.
4. Risk Management
Rivian is risky to trade and with every trade, there is always the possibility of losses. It is good to be willing to take risks but you can do it without damaging your portfolio by using risk management tools like stop loss.
Why trade Rivian CFD with VSTAR
Get access to Rivian CFD using VSTAR. To trade Rivian CFD, all you have to do is open a VSTAR CFD trading account and select Rivian Automotive from the watchlist. With a CFD trading account, you can trade Rivian CFDs and over 1000 companies anywhere in the world.
What’s best about trading Rivian CFD with VSTAR is that you can fully benefit from the falling and rising prices and pay no commission while trading with leverage and liquidity.
Conclusion
Rivian is currently trading at an all-time low but investors who have faith in the company and traders can take advantage of the volatility by employing aggressive strategies.
It is always a good idea to exercise a lot of caution when trading with this high-risk stock. So, endeavour to perform extensive research and technical analysis on the stock before making an investment.
