Let's make one thing clear really quick: Trying to time the market is a fool's errand. Buying and holding for the long run is a key to investing success. That doesn't mean, however, there aren't specific points in time for optimism and, perhaps, even fantastic buying opportunities.
July might just be that point in time for Rivian (RIVN 2.53%) because the electric vehicle (EV) company appears to have moved beyond a recent speed bump and is poised to continue its rally.
What speed bump?
Doubts began surrounding Rivian toward the end of 2022, and during the last quarter of that year, the stock shed 44% of its value. The cause of that spiral was a hiccup in production, thus slowing deliveries.
Many questioned if this was in response to slowing demand, a narrative fueled by the fact it was the same quarter in which Rivian decided to stop publicly sharing its pre-order number, which had previously risen from 83,000 vehicles to 114,000 vehicles over the prior year.
So what happened? In late 2021, Rivian launched its R1T pickup with an innovative feature that had an electric motor for each wheel. That quad-motor design was meant to boost horsepower, traction, and other performance metrics.
But that feature caused a bottleneck in production, and management opted to change the production line on the fly to use its internally developed drive unit, the Enduro. Not only was this move expected to end the production bottleneck, it was also anticipated to reduce costs. The following graph illustrates it.
Why buy in July?
Chart by author. Source: Rivian quarterly shareholder letters.
Take note of the time span from the last quarter in 2022 to the first quarter of 2023, the result of the speed bump previously mentioned. It's understandable seeing how those figures being released by Rivian would have caused doubt, and likely a sell-off in the stock.
However, now that we're seeing the bottleneck fade away, we've seen a quick rebound in production and deliveries. We're also seeing the gap between deliveries and production shrink, suggesting a healthy pre-order list and demand.
Here's another fact for investors to be excited about right now. Initially, Rivian's production guidance for 2023 was 50,000 units, which fell short of Wall Street's initial 60,000 outlook. Even after a slow start due to the production line adjustments, management held steady that it was on track to meet that 50,000 production target.
But privately, Rivian told its employees recently that the company can still reach production of 62,000 this year, according to Bloomberg. If Rivian's recent surge in production and deliveries isn't a flash in the pan, but rather a more sustainable surge, we'll likely see that when the company reports its second-quarter results on Aug. 8. Management might even hint toward topping full-year production estimates.
We'll also likely see more evidence of bottleneck relief when Rivian releases production and delivery numbers for the third quarter. But if investors believe management is past the production speed bump, July might be the perfect time to buy before those metrics are released, causing a continuation in its rally. Consider that since June 26, the stock has soared 93%, pulling its full-year rise to 40%.
The bottom line
Already Rivian has proved it can produce a quality vehicle. Its R1T pickup recently dethroned Tesla atop the rankings for J.D. Power's U.S. Electric Vehicle Experience Ownership Study. And it received the highest safety rating -- Top Safety Pick+ -- from the Insurance Institute for Highway Safety for both its R1T and R1S SUV. They were the only large SUV and electric pickup to achieve the rating in 2023.
If Rivian can continue to accelerate its production, perhaps to levels Wall Street initially expected before the dialing down of expectations, July might prove it's not too late to buy this rising EV maker hand over fist -- if you're willing to accept risks that come with a young company and hold for the long term.
