What happened
Rivian Automotive (RIVN +1.19%) stock may be down over 50% so far in 2022, but some investors believe that has been enough of a drop to make it time to buy. Rivian stock has bounced off its all-time low below $35 per share two weeks ago and has been climbing ever since. It's jumped 40% since then, including another 9% in early-Friday trading this week, according to data provided by S&P Global Market Intelligence.
So what
One reason investors may be buying in at recent price levels is the discount they are getting compared to several well-known Wall Street whales who disclosed they made purchases in the fourth quarter of 2021.
NASDAQ: RIVN
Key Data Points
If successful billionaire investors like George Soros and Dan Loeb are right about their investment in Rivian, recent buyers will get even better returns, as the price has dropped this year. And though there have been some early missteps, there does look to be plenty of potential ahead for Rivian.
Rivian R1T electric pickup trucks. Image source: Rivian Automotive.
Now what
Rivian's share price drop has been driven by a general market trend away from growth stocks along with news that the company is facing rising costs and raw material supply chain disruptions. Rivian received strong backlash from potential customers who had already preordered vehicles when it said it was going to raise prices even for those orders. It subsequently backpedaled and said it would honor product prices from when orders were placed.
That means that the company's margins will be hit since it has to absorb higher costs as it produces those more than 80,000 vehicles. And its ability to produce is facing headwinds, too. In its fourth-quarter earnings update, the company said, "The supply chain will be a fundamental limiting factor in our total output." While it physically has the capacity to produce 50,000 vehicles this year, Rivian said it will have parts and materials available to manufacture only half that volume in 2022.
But some investors seem to feel these struggles are now built into the share price since its decline. And its longer-term potential is still garnering attention. Media company Time just named Rivian one of the top 100 most influential companies of 2022 as an innovator. Whether the company can execute and successfully develop its manufacturing at scale will determine if the investment is a good one. But this week, many investors are thinking it will be.
