Rivian Checks Off Boxes, But Still Needs a Lot to Go Right

Key Points

• Rivian stock is struggling to hold onto gains despite maintaining its production targets for the year. 
• For Rivian to succeed in the short term, the early adopters will have to come through. 
• Investors should weigh two intriguing partnerships that could expand the company’s reach. 
• Rivian stock appears to be a hold as it fights macroeconomic headwinds. 

Rivian NASDAQ: RIVN is taking investors on a wild ride this week. But it has nothing to do with the performance of its electric trucks. The company’s stock is up 3.39% for the week as of this writing. That’s welcome news for investors who have watched the stock decline 64% in the last 12 months.  

But after gapping up 11% on the news that it increased production in its most recent quarter and was maintaining its current production targets, RIVN stock is struggling to hold those gains as macroeconomic issues once again take center stage. 

Can the Early Adopters Come Through 

Every new trend goes through a predictable wave of buyer behavior. On the leading edge of this wave are the innovators, followed by the early adopters. The early adopters are willing to pay the premium to help seed products and services into the market. And can have a significant influence on whether products make the cut.  

And this process is playing out in the EV market in general, and specifically with Rivian. Some might disagree with my thesis, but I base it on the fact that only about 5% of the EVs sold in 2022 will be fully electrified. So while interest and demand may be growing, there is still not a mass market for EVs at this time.  

Further supporting my thesis is the Rivian price tag. The company has two models of its electric truck that are selling for $73,000 an $78,000 respectively. I know there are tax incentives for buying electric vehicles. But those are still price tags that are out of the reach of many Americans in the best of times. They are certainly out of reach of Americans who are tightening their belts to get through a recession. 

That leaves a proportionately small population sample to help seed Rivian into the market. Can it be done? Certainly. Will it be done? That’s the question that investors are mulling over right now.  

Why I Could Be Wrong 

Rivian does have strategically sound partnerships in place. It is in the process of manufacturing 100,000 electric delivery vehicles for Amazon NASDAQ: AMZN. And the company recently signed a memorandum of understanding with Mercedes-Benz to make electric vehicles in Europe. That would get Rivian a leg into a market that would be its next logical expansion point beyond the United States. 

However, investors have seen a similar scenario play out between Rivian and Ford Motor (NYSE:F). That didn’t work out like Rivian investors hoped. Will history repeat itself. I don’t know, but neither does anybody else. So it’s something to watch for sure, but I’m not sure if it moves the needle for me.  

The Analysts’ Outlook is Mixed

On the one hand, RIVN stock still has a consensus price target of $63.05. That’s an impressive 76% gain from the stock price as of this writing. But when you dive inside the numbers you can see that many of the more recent price targets for RIVN stock are much lower. And some are even lower than the current stock price.   

RIVN Stock is a Hold for Now 

The EV market is a cautionary tale of what happens when bubbles burst. It’s often painful for investors who got in at the wrong time.  

That’s the case facing some Rivian investors and I’m not going to be of any help. I’m of the belief that Rivian stock is a Hold as the company is going to find it difficult to push past the broader economic headwinds. I’m going against the consensus of many analysts. But that’s a position I’m comfortable taking with the EV market still taking shape.  

With that said, this is a time when speculative investors can make a lot of money if they’re willing to buy-and-hold shares. Just because it doesn’t fit my investment strategy doesn’t mean it won’t fit yours. Rivian has a market. But at a premium price, it’s unclear how large a market that will be. And that’s my concern with RIVN stock.