With oil prices rising quickly amid uncertainty over global energy supplies, alternative energy investments are getting renewed attention from investors. That makes sense as renewable energy becomes more attractive relative to the cost of fossil fuels. Similarly, that could make the demand for electric vehicles (EVs) grow even faster.
But the stock of EV start-up Rivian Automotive (RIVN -2.19%) isn't participating in the surge of renewable energy names. Shares have hit a record low as investors grow increasingly concerned over production levels and costs heading into the company's fourth-quarter and full-year update coming late on Thursday. But long-term investors may wonder if the 30% drop in shares in the last week now make it a buying opportunity.
Image source: Rivian Automotive.
After one analyst slashed his price target on the shares by almost 60% heading into the quarterly report, the stock plunge continued. That reduction was prompted when Rivian backtracked on a vehicle price increase it had announced last week. The company said it needed to boost prices of its R1T and R1S pickup trucks and SUVs by as much as 20%. Customers with existing reservations cried foul and cancellations began to mount. The company then backpedaled to honor the original pricing for existing reservation holders.
That situation highlighted the fact that Rivian is facing growing costs just as it's beginning to ramp up production. Now the company will have to shoulder those cost increases. When the company updates investors later this week, it is also possible that supply chain challenges force it to throttle back production volume estimates.
Other electric, as well as internal combustion, automotive manufacturers have already had their capacities limited, so it stands to reason that Rivian will as well. Even with the recent slide in the shares, Rivian is still valued with a market capitalization of $38 billion. While it might be a good opportunity for long-term investors, it seems prudent to wait for this week's update before diving in for Rivian shares. There are many moving parts right now, and not all are going in the right direction for the company.
