The share price of electric vehicle (EV) maker Rivian Automotive (RIVN 2.44%) rose by more than 17% Tuesday. Even in the world of EV stocks, which tend to rise and fall rather dramatically, that's a significant price spike.
There was no specific news driving Rivian's share price higher, though. Rather, it appears that investors may be trying to take advantage of the fact that the stock has fallen by more than 47% over the past three months.
Are investors right to be snatching up shares of the electric truck maker now? I think so, but I also think they should temper their expectations.
Image source: Rivian.
There's no denying that Rivian has created a fantastic product. Its R1T model is the first-ever all-electric pickup truck, and it won MotorTrend's Truck of the Year award for 2022.
That doesn't mean it will be a slam dunk when it comes to sales, but it does indicate that Rivan could have a first-mover advantage in the EV pickup truck space.
At a base price of about $79,000, the R1T isn't cheap, and some other electric trucks will be hitting the market soon, most notably the Ford F-150 Lightning. But as Tesla's success has demonstrated, there's a market for EVs that are designed, built, and sold by companies devoted entirely to that specific niche.
Will traditional automakers succeed in the EV industry? Of course. But it seems a bit premature to count out disruptive players like Rivian that already have great products.
One of the biggest arguments against Rivian right now is the fact that it's facing supply chain problems and rising costs.
While those are significant hurdles, and the company forecasts that it'll only produce 25,000 vehicles this year, it also has enough cash to keep the company growing.
Rivian ended 2021 with $18.4 billion in cash, which should give the EV maker the financial cushion it needs to stay afloat as it expands production.
That being said, there are no guarantees for Rivian or its investors. The automotive industry is experiencing a significant shift right now, and many traditional automakers will successfully move from gas-powered to battery-powered vehicles.
Some of the current crop of hopeful EV makers will carve out their own niches over the next few years, and some may fade away.
But with its current cash stockpile and its award-winning truck, Rivian has the potential to be a success over the long term, which is why I think opening a small position in this EV stock could be a smart move.
