Sign InRivian Automotive: A Promising Prospect in the EV Market Despite Recent Challenges
Summary
Rivian Automotive, Inc. is facing challenges in the electric vehicle market but has strong investor confidence due to its market cap and recent surge in production and deliveries, making it an interesting prospect for investors in the long term; however, the stock currently has a negative EPS and weak financial performance, so a Hold recommendation is advised until signs of profitability are more apparent. (August 2, 2023)
Fundamental Analysis
Rivian Automotive, Inc. (RIVN) is a notable player in the electric vehicle market, currently trading on the NASDAQ. Its last close was at $25.91 on August 02, 2023, but experienced a negative change of -5.09%, likely due to market reactions and the news. Recently, investors may have been shaken by Ford’s July EV sales slump, which precipitated a drop in Rivian's stock.
Despite these recent challenges, Rivian boasts a sizeable market cap of $24.14 billion, which indicates significant investor confidence in the company's long-term prospects. The share volume, almost equal to its average volume, shows a balanced trading activity.
Additonally, Rivian recently appointed a new chief policy officer, Alan Hoffman. The company’s production and deliveries surged during Q2, positioning it fairly well in the EV market. Their decision to avoid joining the EV price war, contrary to some competitors, might ensure a sustainable profit margin in the future.
However, the company’s EPS stands at a relatively high negative figure of -7.1, reflecting a lack of profitability. Yet, this is common among growth companies in sectors like electric vehicles, which requires substantial upfront investment for research and development. This area needs improvement for increased investor confidence.
Technical Analysis
The technical indicators for Rivian's stock provide a bit of a mixed picture. The MACD of 3.87 for the 3-month period suggests a bullish trend. Moreover, the Relative Strength Index (RSI14) is at 52, indicating neither overbought nor oversold conditions.
The stock is trading above both its 50-day moving average (18.92) and its 200-day moving average (20.10), giving a bullish signal. However, after reaching a year high of $40.86, the stock price has retreated significantly and is currently hovering closer to its year low of $11.68.
Price Forecast And Valuation
Analysts provide a broad range of price targets for RIVN, with a high of $147 and a low of $14. The consensus target is at $53.95 while the median is at $35. These targets suggest that analysts see potential value and growth in Rivian over the long term.
The discounted cash flow (DCF) analysis further supports this with a value of $38.58, indicating the potential for upside from its current price. The PE ratio is negative, which is to be expected from a company not yet profitable.
Final Evaluation
In the context of Rivian’s technical and fundamental aspects, even though the EPS is currently in the negative and the company is yet profitable, its market position within the EV sector and potential for growth make it an interesting prospect for investors willing to take on some risk in anticipation of future returns.
The stock is performing well technically, trading above both its 50-day and 200-day moving averages. Considering the valuation of DCF, it shows considerable undervaluation against its current price. Nevertheless, low EPS and a negative PE ratio suggest weak financial performance.
Taking all these factors into account, the recommendation for Rivian stock at this point would be a Hold. While the company shows signs of solid future potential, investors may want to wait until further signs of profitability appear before significantly increasing their positions.
