How the mighty electric vehicle (EV) stocks have fallen. It wasn't so long ago that EV stocks like Rivian (RIVN 2.44%) were the darlings of forward-looking investors. The subject of many SPAC acquisitions, EV companies fueled investors' hopes of massive growth, and their stocks soared into the stratosphere.
But those days are in the past. Reality has settled in. Shares of Rivian, for example, had changed hands as high as $106.80 in January 2022; however, they're now hovering near their 52-week low of $15.82. With this more reasonable price tag, some may be wondering if now's the time to park Rivian stock in their portfolios.
So let's kick the tires and see if clicking the buy button is a good move right now.
What's charging up the bulls' excitement
Whether seeing commercials on TV or spotting EVs on the road, investors recognize that interest in these automobiles is growing. This surely contributes to the bulls' enthusiasm for Rivian, which is hustling to take advantage of the market opportunity. In its S-1 regulatory filing, for example, the company pegged its total addressable market at nearly $9 billion.
Similar to how Tesla has raced ahead of the pack and become a leader in sales for EV sedans, investors believe that Rivian can dominate the electric pickup truck niche. But it's not only consumers' garages where Rivian hopes to have a presence. The company's also targeting the commercial market with its Electric Delivery Van, which has already begun to gain traction. Amazon, for example, placed an initial order for 100,000 units, and it reported that the EDVs are beginning to operate in more than 100 U.S. cities.
Providing an additional source of encouragement, development of Rivian's new production facility in Georgia remains on track. With an estimated annual production capacity of 400,000 vehicles, the Georgia facility recently received an important environmental permit from the U.S. Army of Engineers, allowing the company to proceed with construction activities.
What's powering the bears' concern
Although Rivian celebrated its R1 backlog exceeding 114,000 at the end of Q3 2022, skeptics question the company's ability to execute on delivery of the vehicles. Throughout last year, Rivian had consistently reaffirmed its projection for 2022 deliveries of 25,000. Two weeks ago, however, the company reported that it fell short of this forecast, ending the year with a production total of 24,337 vehicles.
It's not only news regarding the R1 model that has some investors reaching for a yellow flag. In its Q3 2022 shareholder letter, Rivian reported that it now expects to launch its R2 platform in 2026 instead of its original projection of 2025. The company characterizes the R2 platform as "a more accessibly priced mid-sized SUV targeting global markets," and one that will "be key in driving attractive long-term returns on capital." With analysts expecting Rivian to report a loss per share of $5.59 in 2023, it seems that the rollout of the R2 platform can't come soon enough.
With the company changing lanes from consumer to commercial vehicles, investors will find another reason to slow their roll. In September, Rivian announced a memorandum of agreement with Mercedes-Benz regarding a joint venture to manufacture electric vans. Last month, however, investors found momentum for the partnership grinding to a halt as Rivian announced it was no longer moving forward with Mercedes-Benz in the joint venture. While this isn't a make-or-break development, bears surely interpret the news as a sign that Rivian's road to growth isn't as certain as it once seemed.
Now's not a great time to ride with Rivian
Sure, the price tag for Rivian's stock is a lot more attractive than it was at this time last year. A lower price tag means nothing, though, if you have little confidence in the company's ability to perform. With its shortfall in production for 2022 and a delay in R2 production until 2026, there are meaningful concerns.
No doubt, the potential is there for Rivian to be a successful investment, but investors should want to see the company score some more wins first before deciding to pick up shares. Fortunately, there are plenty of other EV stocks to consider.
