RIVN Stock: Don’t Be Fooled by the R2 Hype, Single Digits Could Be Next
A spate of bad news (namely, a poorly received quarterly earnings release) knocked Rivian Automotive (NASDAQ:RIVN) stock lower last month. This month the market reacted positively to two early March announcements. The news is temporarily boosting the stock, maintaining it at $10 to $12 per share.
So, this means investors now can slowly buy in before the next rally, right? Not so fast. If you are of the view that RIVN has bottomed out, consider it best to think otherwise. Rivian’s low-teens price floor could prove temporary. From here, a move to single-digit prices may be what arrives next.
RIVN Stock and the Short-Lived Impact of R2 and Cost Cutting News
On March 7, Rivian unveiled its long-anticipated R2 mid-size vehicle platform, and the two vehicles that will be produced on said platform: the R2 mid-size electric SUV, and the R3 mid-size electric crossover.
The electric vehicle maker hopes to launch these new models for $45,000 or less to boost growth and pave a path toward profitability. Speaking of which, alongside the R2 unveiling, Rivian also announced new cost-reduction plans.
According to management, plans to halt production of a new auto plant in Georgia (shifting R2 production to its Illinois plant in the process), along with other cost cutting measures, will save the company around $2.25 billion.
With these developments both representing a major milestone, as well as relieving sell-side concerns about cash runway, it’s no surprise that RIVN stock surged 13.4% on this news.
Again, though, bullishness has cooled regarding the Rivian updates. Even with the stock as of this writing finding support (perhaps, because of the release of another post-R2 analyst upgrade), the next move for shares may be below $10 per share, not back above $15 per share.
Demand Doldrums May Lead to a Further Price Slide
Admittedly, there’s more than hope and hype behind the current bull case for RIVN stock. There is some data out there suggestive of a growth resurgence for Rivian. For instance, according to RJ Scaringe, founder and CEO of Rivian, the R2 racked up 68,000 reservations within 24 hours of its unveiling.
That said, while Rivian’s growth may indeed accelerate, it may not be enough to save the day here for shares. For one, R2 deliveries are not expected to begin until early 2026. Forget about merely competition from market leader Tesla (NASDAQ:TSLA).
By then, incumbent automakers like Ford (NYSE:F) and General Motors (NYSE:GM) will be much further ahead than they are with their respective EV endeavors. If that’s not bad enough, this is assuming that EV demand growth picks back up between now and two years out. Factors like range anxiety may continue to impact growth.
To top things off, between now, and when Rivian commences R2 sales/the EV market (possibly) gets back into the fast lane, continued cash burn and frustration with EV demand doldrums could lead to a steady slide for the stock.
Sell/Avoid for Now and Wait for a Fire Sale Entry Point
Among the EV contenders, Rivian may be the only one with somewhat of a shot of becoming a formidable Tesla competitor. However, consider these “Tesla killer” bona fides to be cold comfort, as now even TSLA is an out of favor stock among investors.
As argued recently, TSLA still has substantial downside risk. Continued low-to-negative growth will make it increasingly harder to justify Tesla’s growth stock valuation. A similar scenario could play out with RIVN in the coming quarters.
As EV stocks fall out of favor, it’s not outside the realm of possibility for even some well-regarded names in the space to at some point drop to fire sale prices.
With RIVN stock, that would be a move to prices well below its tangible book value ($9.44 per share). If this happens, a second look is warranted, but for now, consider it best to sell/avoid this stock.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
