What happened

The stock of Rivian Automotive (RIVN 0.27%) is on fire. Shares have soared more than 23% in just the past three days. That includes today's gain of 6.7%, as of 3 p.m. ET.

So what

The surge reverses an 18% drop in the month of June and represents a kind of sigh of relief from investors. While the company had about 90,000 preorders for its consumer electric trucks, and another 100,000 vehicle order from Amazon for commercial electric delivery trucks, investors have been concerned about the company being able to fulfill those orders. As of May 9, the company had produced a total of only 5,000 electric vehicles (EVs). But yesterday, it announced production has surged. After completing another 4,400 vehicles for the quarterly period ended June 30, Rivian now looks to be on track to fulfill its projected 25,000 vehicle production goal for 2022.

Production line of green Rivian pickup trucks at its Illinois plant.

Image source: Rivian Automotive.

Now what

Investors should still put this relief rally in context. Shares are still down nearly 70% year to date, highlighting just how much pessimism was built into the stock prior to this week. The company has now produced just 8,000 EVs in total, yet still holds a market cap of $28.5 billion. 

The company provided an update and guidance yesterday that lacked any new bad news. The 25,000 vehicle production goal for this year had already been reduced due to supply chain limitations. The company has equipment and processes in place to manufacture twice that number at its Illinois plant. 

But a lack of bad news counts as good news for now. Rivian has the capital it needs to expand the Illinois plant and build a second facility in Georgia. The company expects to have enough capacity in place by 2026 to produce 600,000 vehicles annually. 

Investors should realize that this goal is still a long way off, and some success is built into its lofty valuation. But the recent rally shows that with enough pessimism built in, even small victories can move stocks a long way.