Sign InRivian's Blend of Automotive and Tech Sectors Offers Growth Opportunities Despite Volatility
Summary
Rivian Automotive, Inc. offers a mix of optimism and caution with its focus on electric vehicles, as recent performance and ongoing initiatives show potential, but their negative EPS and PE ratio, as well as high volatility and low trading volume, indicate some risks to consider; however, Wall Street analysts suggest buying the stock in the long-term due to its undervalued status and growth prospects. (August 16, 2023)
Fundamental Analysis
Rivian Automotive, Inc. (RIVN) offers an interesting blend of automotive and technology sectors with its focus on electric vehicles. The company's recent performance and ongoing initiatives provide a mixture of optimism and caution.
RIVN's EPS stands at -7.1, indicating the company is currently not generating a profit; this is not unusual for growth-oriented firms in their early stages. The negative PE ratio of -2.94 confirms the same picture. Rivian's market capitalization of $19.45 billion places it among the mid-cap firms, which are generally considered as companies that have higher growth opportunities compared to large-cap companies.
News data indicates that Rivian has been raising guidance, which typically suggests optimism about the company's future earnings. Furthermore, the fact that some major investors are betting big on Rivian is a good sign. It also indicates that the recently reported second-quarter earnings beat expectations on both revenue and adjusted loss per share, which is encouraging.
The consensus from Wall Street analysts is a 'Buy', with 11 analysts suggesting 'Buy', three saying 'Hold' and two indicating 'Sell'. However, with a discounted cash flow (DCF) value of $33.56, Rivian's stock appears to be undervalued at the current price of $20.95. The average target price also stands at $52.85, suggesting decent upside potential.
Technical Analysis
The technical data portrays a conflicting view to the fundamental indicators. The Relative Strength Index (RSI) is at a low value of 20, indicating the stock is currently oversold – typically a signal to buy. However, the recent downward movement and the Average True Range (ATR) of 7.74 suggest high volatility, which can be a risk-factor for investors.
Rivian's stock is trading slightly below the 50-day Moving Average of $20.98 and above the 200-day Moving Average of $19.55, with support and resistance levels at $20.43 and $24.7, respectively. MACD (3-month) of -0.04 is almost near to the zero line which implies that there is no clear trend.
What is concerning is the volume of shares traded. The recent volume stands at 11.95 million, compared to an average volume of 51.69 million, demonstrating a significant decrease in trading activity.
Predictions and Recommendations
Considering the recent price of Rivian at $20.95, current technical indicators and analyst predictions, it is expected that Rivian's stock price might experience some uplift on August 18, 2023, possibly moving towards the resistance level of $24.7 by the end of the week.
However, the technical indicators suggest a mixed picture with signs of overselling, high volatility, and decreased trading volume. These factors induce a level of risk that needs to be accounted for in the investment decision-making process.
Taking into account the fundamentals and the technical picture, along with Wall Street’s optimistic outlook for the stock, Rivian is categorized as a 'Buy' in the long-term perspective. It means it can be considered for accumulation in the portfolio given its long-term growth prospects and its current undervalued status. Nonetheless, investors should be cautious of the stock's high volatility and lower trading volume which can bring in short-term risks.
Please note that while these recommendations and predictions are made on the basis of available data, all investment decisions should be made considering the investor's risk appetite, investment goal and time horizon.
