How Safe Is Rivian Stock?

Brit Ryle

Posted January 19, 2024

You’ve probably seen footage from the coldest parts of the country: Teslas abandoned on the street because the lithium-ion batteries can’t hold a charge when it’s wicked cold out. It’s not a very good look for the electric vehicle (EV) sellers that are seeing weakening demand growth anyway…

EVs lose close to 15% of their range in temps under 20 degrees fahrenheit – which is actually similar to the amount of miles per gallon lost for internal combustion engines in the cold. Except, you know, if you want heat in your car – then your Tesla might lose as much as 40% of its range. So if you weren’t aware of that fact, well, your car may be sitting on the side of a road somewhere.

I think the most mainstream carmakers – Ford and GM – have really misunderstood the EV market as it now stands. They thought they could fairly seamlessly transition their customers from ICE to EV, without any real hiccups. 

And while it is true that there’s a percentage of people that want an EV, these buyers are still a niche market, maybe 10% of the total. They want a Tesla, for instance, not any old generic EV from GM. Or they want a Rivian, not a Ford Lightning. And speaking of Ford…

The first Ford EV I saw on the road was the electric version of a Mustang. My jaw dropped: not a fun looking car! The “thing” that made the Mustang wildly popular in the 60s was that it was fun, sporty, good-looking. Later versions got muscley, but still fun.

The Mustang EV was not any of that. I’m still surprised that I see one on the road from time to time, because I can’t see why anyone would buy it. Fact is, not many people did…

The Ford Lightning truck is an equally egregious misunderstanding of Ford’s truck buyers. I moved from Baltimore to the southern coast of Georgia a couple years ago. Of course there are plenty of F-150s rolling around Charm City. But down here it’s a whole different ball game.

Casual observation: trucks down here tend to be lifted, have big wheels and custom exhausts so they are LOUD. EVs are not loud, and that right there is strike 2. 

So What About Rivian

I recommended Rivian (NASDAQ: RIVN) about a year ago at $16.25 a share. And I said it was the only EV stock worth owning in my Predictions 2024 article. 

Currently $15.50 or so, we’re down a little. Question is: up or down from here?

The reason I’ve stuck with Rivian is that it is not having the production issues that have plagued other EV makers. Yes, 2023 saw incremental production cuts, but nowhere near the scale that has hit virtually every other EV maker, except Tesla (NASDAQ: TSLA). 

Rivian has executed very well – loss per share as it boosts production and builds out its Georgia factory has come in better than expected in each of the last four quarters. When fiscal 2023 ends in March, trailing 12-month revenue should be $4.4 billion. Fiscal 2024 revenue is expected to hit $6.2 billion. 

The company is currently valued at about 2.5X that $6.2 billion. Not ridiculously overvalued. But not exactly cheap either…

Wall Street analysts are split on the stock. Deutsche Bank just downgraded it to “hold” with a $19 target. Goldman Sachs put a $25 price target on the stock a few months ago. Baird called Rivian one of its “best ideas” for 2024. UBS rates it “neutral” with a $26 target. 

Yep, not very much help.

The EV market is very much in “show me” mode right now. Show me more charging stations, show me better range, show me better battery tech, show me more competitive prices…

All the above are coming, all the above will take time. This tells me that EV stocks will remain vulnerable for the foreseeable future. That includes Rivian. 

When I say vulnerable, suppose there’s a 10% correction for the stock market. Rivian stock will likely do worse than the overall market. Suppose we get an administration that’s less friendly to EVs? That will hurt Rivian stock price. Suppose inflation picks up? Same result.

Of course there are bullish catalysts for Rivian. Its delivery van deal with Amazon is a big one. Rivian delivered 1,000 electric delivery vans to Amazon last year, there’s 9,000 to go. And Amazon let Rivian out of its exclusive contract, so AT&T is likely to become a customer. 

Then there’s Tesla and the Cybertruck. That thing is crazy looking, a vehicle for the apocalypse. And I think it will be wildly popular, for the same reasons that Hummers were a thing 20 years ago. A rising tide for EV trucks will help Rivian too. 

Still, ultimately, I have to call Rivian stock a “hold” right now. There really isn’t an imminent reason to buy it. There are better places to put your money. Like Micron (NYSE: MU), Amazon (NASDAQ: MU) or even Intel (NASDAQ: INTC).

Rivian’s 52-week lows are down around $12.50, that’s a much better buy point.

I’m traveling to Baltimore today, so that’s gonna do it for me. Have a great weekend and I’ll talk to you Monday…

Briton Ryle
Chief Investment Strategist
Pro Trader Today