Sign InRivian (RIVN) Stock Shows Potential for Growth Despite Technical Volatility
Summary
Rivian Automotive's stock shows bullish technical signals and potential for growth in the EV market, leading to a Buy recommendation despite being currently unprofitable; however, caution is advised due to high market volatility and ongoing cash burn (August 29, 2023).
Technical Analysis
Rivian Automotive, Inc. (NASDAQ: RIVN) closed the trading day on August 28, 2023, at $20.53, an increase of 2.29% from the previous close. The company's stock fluctuated between a low of $19.98 and a high of $20.74 during the trading day, with a trading volume of 14.6 million shares. Despite the recent trading activity, the average volume is significantly higher at approximately 51.8 million shares.
RIVN's Relative Strength Index (RSI) is 23, indicating oversold conditions. Generally, an RSI below 30 is considered oversold, suggesting it may be underpriced and due for a price correction. The Moving Average Convergence Divergence (MACD), another momentum indicator, shows a negative value of -2.11, suggesting bearish trends on a 3-month basis.
The 50-day moving average ($21.71) is higher than the current price, and the 200-day moving average ($19.18) sits lower than the current price, implying intrinsic volatility in the price trend. In terms of ATR, the stock shows a high degree of volatility with a score of 6.5.
As of the last trading day, the stock has immediate support at around $20.43, indicating possible selling pressure, and resistance at $21.62, representing a buying opportunity threshold.
Fundamental Analysis
Given that Rivian’s market capitalization is about $19.30 billion and it has about 940.31 million outstanding shares, the company clearly operates on a large scale. However, its EPS of -6.53 and a negative P/E ratio of -3.14 suggests that the company is currently unprofitable.
Despite this, there are long-term growth prospects for the company as detailed in the discounted cash flow (DCF) analysis, which estimates the intrinsic value of an investment based on its expected future cash flows. Rivian's DCF is $33.20, much higher than the current price, suggesting potential for growth.
Moreover, analyst consensus predicts median target prices of $33, with extremes ranging from $14 to $147. Notably, the majority of analyst recommendations (11 buys, 3 holds, 2 sells) lean towards a 'buy' consensus.
However, the news reports highlight that Rivian is still burning through a lot of cash, and although there is a clear path to profitability, this path may be rocky. Some securities analysts see it as a stock to watch.
Stock Price Prediction
The current technical and fundamental analyses point towards potential for growth in the short and long term. On the trading day of August 29, 2023, the company's stock may stay near the resistance level of $21.62, showing bullish tendencies. While price fluctuations are to be expected in the short term, in line with the company's previous volatility, the outlook for the following week is reversion to the mean, pushing the prices towards the average from the given period.
Final Evaluation
In light of the above analysis, RIVN's stock would be recommended as a "Buy". Despite currently being unprofitable, the stock's bullish technical signals, relatively low RSI, consensus towards 'buy' recommendations, and the potential growth in the EV market, lend credence to potential for the stock's price appreciation in the long run. However, investors should exercise caution due to the high volatility of the EV market and should factor in Rivian’s current unprofitability and ongoing cash burn.
