Many early-stage electric vehicle (EV) companies have garnered investor attention in the last two years. Different niches in the sector will need to be filled, from consumer vehicles to commercial vans and electric heavy trucks.
Rivian Automotive (RIVN 1.02%) is looking to gain entry into the pickup truck and SUV markets along with supplying companies looking to expand commercial delivery van fleets. That focus helped Rivian soar in value to more than $100 billion after it went public. But now, with the valuation down to under $26 billion, there are several reasons it might finally be time to start an investment in Rivian.
Several things have contributed to the drop of more than 70% in Rivian's share price so far in 2022. Investors have rotated out of the more speculative companies in the growth and technology sectors this year, for one thing. But the company has its own specific challenges, too.
Supply chain disruptions that have affected many manufacturers globally are especially hard to navigate for companies like Rivian which are just starting to ramp up their operations. That led the company to reduce its guidance for 2022 production to 25,000 vehicles when it has the equipment and processes in place to produce twice that many. At the same time, inflation is causing costs to increase, too. But looking at the bigger picture of an investment over the long haul can help put those challenges into perspective.
Tesla, for example, may have had different challenges, but it took years for its production to ramp up to a mass scale.
Tapping a massive market
While it works to deal with current challenges, Rivian is also preparing for the future. It has plans to build a second production facility, and the state of Georgia recently agreed to offer the company $1.5 billion in incentives for the $5 billion project. Rivian wants to have the capacity ready for future demand that should continue to grow quickly.
While global EV sales more than doubled year over year in 2021, the International Energy Agency (IEA) estimates they will reach between 25 million and 47 million by 2030. The range in estimates is based on the level of government investments that will be used to spur the industry's growth.
The next update
Rivian will provide another update on Wednesday, May 11, with its first-quarter financial and operational reports. Investors should never game how a stock might react to quarterly earnings news. Even if you have a good idea of what the company might say, it's impossible to know how short-term traders might move the stock on it. If you have the patience to ignore short-term volatility, it shouldn't matter whether you buy before or after earnings. If the stock does drop with no news that changes the longer-term story, it could just be a better opportunity this week.