Analysts Believe Rivian Stock Is a Solid Investment Option
In recent times, there has been a lot of buzz surrounding Rivian (NASDAQ: RIVN) stock despite its downward trend. Although the stock has experienced a 16% decline in 2023 and its value has decreased by more than half over the past year, analysts are still advocating for investors to buy in. This raises the question: are these analysts right in their assessment? Let’s delve into the factors that support their bullish stance.
One key factor contributing to the optimism surrounding RIVN stock is the backing it has received from prominent figures like Andy Jassy and Brian Kemp. Jassy, the CEO of Amazon.com (NASDAQ: AMZN), placed a massive order of 100,000 electric delivery vans with Rivian in 2019. Despite only about 10,000 of these vans having arrived so far, proponents argue that this deal indicates the potential for future cash inflows. Furthermore, Amazon also acquired a 20% stake in Rivian’s stock and has retained this investment, even though it has impacted the company’s own financial results.
Kemp, the Governor of Georgia, has also shown his support for Rivian by allocating $1.5 billion of taxpayer money to facilitate the development of a new manufacturing plant located outside Atlanta. This investment falls in line with Georgia’s initiatives to attract environmentally friendly businesses. The move has garnered positive sentiment and allowed Rivian to enjoy low-cost, greenfield manufacturing, a factor that contributes to the optimistic outlook on the stock.
Strikingly, 12 of the 20 analysts covering Rivian at Tipranks predict a 69% increase in the stock’s value over the next year. Their confidence stems from the combination of anticipated sales volume guarantee, as demonstrated by Amazon’s order, and the favorable conditions provided by the low-cost manufacturing facility. When these factors align, it is difficult to overlook the potential for success.
However, it is essential to consider the other side of the story when assessing the prospects of RIVN stock. While Rivian’s flagship vehicle, the R1T truck, has gained attention and acceptance among consumers, it comes with a hefty price tag of $73,000. Additionally, its standard model only offers a range of 270 miles on a single charge, necessitating frequent recharging every 200 miles in practical terms. Rivian also produces an SUV, the R1S, but the company has only manufactured 354 units thus far, making it less prominent in discussions about the brand.
To counter these concerns, Rivian has promised to introduce lower-priced models, such as the R2T, starting at $40,000. However, the delivery of these vehicles is not expected until 2026, despite their announcement in the upcoming year. Chief Financial Officer Claire McDonough highlights the importance of reducing material costs, and there is an assumption that labor expenses will remain low, given Georgia’s status as a non-union state. Nonetheless, this assumption may face skepticism from labor unions like the United Auto Workers.
Another crucial factor influencing the outlook for Rivian is the competition it will face in the electric vehicle (EV) market by 2026. The market dynamics are rapidly evolving, with EV prices plunging, including offerings from Tesla (NASDAQ: TSLA) that already align with Rivian’s targeted price point. Furthermore, major automotive manufacturers, such as General Motors (NYSE: GM), Ford Motor (NYSE: F), Stellantis (NASDAQ: STLA), and international players from Germany, Japan, and China, are all entering the EV space.
The EV market is becoming increasingly crowded, challenging Rivian to carve out its niche. Previously, creating an EV was considered a complex task. However, the paradigm has shifted, as EV costs are declining, and battery producers are gaining more significance in the equation. This transformation poses a potential risk to Rivian, as its Georgia plant and Brian Kemp’s investment may not provide the expected returns.
In conclusion, while analysts remain bullish on RIVN stock, it is crucial to consider the dynamics of the rapidly changing EV market and the potential for heightened competition. Rivian’s impressive backers, such as Amazon and Brian Kemp, add credibility to their position, but investors should carefully evaluate the long-term prospects of the company. Only time will reveal whether Rivian can maintain its competitive edge and deliver on its promises.