Wake Up, RIVN Investors! Things Are Tougher for Rivian Than It Seems.

Since its last earnings release last month, there has been little news out of Rivian Automotive (NASDAQ:RIVN). With this, there is plenty of speculation regarding what happens next for the company, and for RIVN stock.

Based on how the early-stage electric vehicle maker’s shares are performing right now, it’s clear that the market overall holds an “on the fence” view on the stock.

However, one sell-sider remains optimistic that this EV contender still has a strong chance of proving skeptics wrong. Even as long standing issues persist, the analyst believes the company will become a formidable competitor to Tesla (NASDAQ:TSLA) and the incumbent automakers.

This optimism notwithstanding, there is conflicting evidence whether Rivian can ultimately scale up and become profitable.

Why One Analyst Says RIVN Stock Is a Standout

According to MarketBeat, the sell-side community is moderately bullish on Rivian stock. Eleven analysts give shares a “buy” or equivalent rating, versus four that give it a “hold” rating, and two that give it a “sell” rating.

However, amongst the eleven bulls, one of them has been quite vocal about his bullishness: Barclay’s Dan Levy.

In past coverage of RIVN stock, I referenced Levy’s remarks about the company following the aforementioned earnings release. At the time, the analyst argued that “the worst has passed” for the EV upstart.

More importantly, he believed that things were moving in the right direction. On June 2, following his visit to the company’s flagship production facility in Normal, Illinois, the analyst reiterated his bullish stance on Rivian, stating the situation is “becoming more normal at Normal.”

That is, between the continued ramp-up of production, coupled with operational improvements, Levy believes Rivian is on its way to positive gross margins.

Much like Levy’s prior commentary on Rivian, and similar commentary from other analysts, I don’t disagree that there is merit to their argument. I do, however, believe that there are some major flaws with this bullish case.

A Closer Inspection

If the electric truck and van maker’s output significantly increases, leading to narrowing operating losses and a path to profitability, I don’t deny that RIVN stock stands to experience a massive increase in price.

The issue is that, upon looking under the hood with Rivian, it’s hard to shake off skepticism about this comeback ultimately happening.

Considering the competitive landscape, it’s still questionable whether the company will be able to reach the level of annual vehicle sales (hundreds of thousands) likely necessary to become consistently profitable.

Largely, due to how much pricier Rivian’s electric pickup trucks are compared to comparable offerings from Ford (NYSE:F). Ford’s electric trucks also qualify for the full EV tax credit. Trucks from Rivian, on the other hand, qualify for only a partial tax credit.

Tesla’s upcoming release of its much-awaited Cybertruck could also stymie sales growth starting later this year. A greater ability to compete on price isn’t the only reason why the Cybertruck is a threat.

Rivian may have its legion of fans, but Tesla’s far greater brand recognition could also give it an edge in capturing a large share of the fast-growing electric pickup truck market.

‘Watch and Wait’ is Still Your Best Move

Sure, it’s not set in stone that rising competition leads to more disappointment with Rivian. The EV truck market could be growing fast enough to outweigh this factor, enabling the EV maker to turn its ramped-up output into ramped-up sales.

However, if better times lie ahead, why do company insiders continue to sell? As InvestorPlace’s Eddie Pan reported June 6, Rivian’s C-level execs continue to trim their personal positions in RIVN.

Not only that, it’s not as if this stock will coast at current prices (around $14 per share), then spike back up to $20, $30, $40 or even more per share in the blink of an eye if the situation improves.

Chances are, there will be plenty of time to buy RIVN stock, if a comeback starts taking shape. Until then, continue to “watch and wait.”

RIVN stock earns a D rating in Portfolio Grader.

On the date of publication, Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.