Rivian is all set to start 2024 with a bang

Key Points

• The stock had a bumpy 2023 but is ending the year well ahead of its peers. 
• Several key tailwinds are in place, which should support further gains.
• Aside from perhaps Tesla, Rivian remains one of the most attractive electric vehicle options out there.

As we head into 2024, the electric vehicle (EV) space remains one of the most closely watched by investors. All told it's had a decent year, but one that's far from its best. The Global X Autonomous & Electric Vehicles ETF NASDAQ: DRIV is set to finish 2023 with around a 25% gain, having been barely positive as recently as October. 

Improving inflation readings and the prospect of falling interest rates has helped a lot, with one stock in particular shining brighter than most others: Rivian Automotive Inc NASDAQ: RIVN. While its shares have just about managed to match the annual return from the broader EV ETF, while being far outpaced by the king of EV, Tesla Inc NASDAQ: TSLA, who's returned 140% this year, it's still closing the year out strong. 

Rivian shares are up 53% since the middle of November, more than twice that of Tesla's 21% return and almost four times that of the DRIV ETF's 14% return. So, while it mightn't have been the strongest year overall, for those of us on the sidelines considering some EV exposure heading into January, Rivian's performance over the past few weeks alone has made it clear it needs to be considered. 

Bullish upgrade

The team at Stifel was onto this earlier this month when they upgraded their rating on Rivian stock. They acknowledged the ongoing headwinds hurting the industry as a whole, namely range anxiety, vehicle costs, and perceived lackluster charging infrastructure, but see Rivian as being well-prepared to outperform its peers over the coming quarters.

Much of this bullishness comes from Rivian's unique strengths, such as its high-quality R1S/R1T models, which have been driving brand awareness. There's also the company's strategic agreement with Amazon.com Inc NASDAQ: AMZN for 100,000 electric delivery vehicles and its ability to sell its vans to other fleets now. 

This expansion into the broader commercial vehicle market with its electric vans will offer significant cost savings for businesses, potentially revolutionizing sustainable transportation​​ while making Rivian the go-to name in the market. In addition, the company's margins are set to improve throughout 2024, with better pricing, new supplier agreements, and rising production all lending their weight to the company's growth potential. 

On top of that, the industry-wide headwinds that have done so much damage in recent years do appear to be abating, with inflation looking increasingly tamed and the prospect of interest rate cuts very much on the table heading into 2024. 

Further gains expected 

Rivian is entering 2024 with a street-high price target of $44, which is pointing to a further upside of nearly 100% from where shares were trading this week. This would have shares back trading at their highest levels since April of last year, which would be a remarkable turnaround. It was only this past summer that the stock was printing all-time lows, having fallen more than 90% from its highs. 

It's unlikely to be all one-way traffic, however. Despite all the positives mentioned above, Rivian faces the usual challenges, such as increased competition across the board and the need for continual innovation to stay ahead of the ever-increasing number of EV peers. Its profitability, specifically its lack of it, is also an ongoing concern and one that management will be eager to address in the year ahead. But things are trending in the right direction, and aside from a small slip earlier this year, Rivian has consistently posted record quarterly revenue numbers since going public in 2021. 

Its shares have bounced hard from the $15 level, where they traded down in November, and they are encountering some resistance right now around the $24 mark. This may be no bad thing, though, as it's allowing the stock's relative strength index to cool from the red-hot readings it was starting to give, which sets Rivian shares up well for the next stage of the rally to begin next month.