Rivian Automotive (NASDAQ:RIVN) stock has doubled from its April lows and now sits where it was back in January. Shares are roaring ahead following its partnership with Volkswagen (OTCMKTS:VWAGY), which could see the German automaker invest as much as $5 billion in the electric SUV company.
Wall Street is also upbeat on Rivian. TipRanks shows a bullish outlook and a consensus one-year price target of $17, suggesting the stock is fairly valued. Canaccord analyst George Gianarakis, however, raised his price target last month to $30 a share and calls the Volkswagen deal “monumental.”
Yet analysts also expect Rivian’s earnings to worsen at the beginning of August. Losses per share are expected to widen to $1.27 from $1.05 per share last year. If the EV maker can pull off an upset and show improvement, the stock could rally higher. It might even retest last December’s high of $28 a share.
Although Rivian stock remains 90% below its peak following its 2021 IPO, the EV company is arguably in the best position financially it has ever been.
So, if Rivian stock does roar forward, that would be an excellent time to take your money off the table.
Rivian Stock: Revving Up Ahead of Earnings
Rivian Automotive is scheduled to release its second-quarter results in less than three weeks on Aug. 6. Because it already released its quarterly production and deliveries numbers there is no anticipation over what they will be. Rivian cleared out a lot of cars from dealer lots.
The EV maker delivered 13,790 SUVs, well ahead of analyst expectations of 11,500 vehicles, while producing 9,612. That’s a 44% differential, meaning it was able to move a lot of unsold inventory.
But how those truck sales move through the income statement will tell investors a lot about whether it is still on track to achieve “modest” gross profitability.
The electric truck maker’s results are part of the reason Wall Street is bullish once again on EV stocks. But price cuts are probably behind the sales, which suggests margins will deteriorate before they improve.
We know Rivian and the industry have been slashing prices to spur demand. Tesla (NASDAQ:TSLA) cut prices on its Model 3 and Model Y vehicles and offered additional incentives to move them.
Although its deliveries were down 5% year-over-year, it also sold a lot more than analysts expected. Similarly, Lucid Group (NASDAQ:LCID) saw a 1% increase in sales through price cuts, though its dealer lot backlog remains bloated.
Rivian’s own inventory reductions, if achieved through steeper-than-expected cuts, could push the EV maker’s profitability target back. But it could also be setting the stage for the next phase of growth.
Lower Prices May Not Be Enough
Rivian is preparing to introduce its new lower priced R2 SUV. Seating five people, it will cost around $45,000, much better than the $70,000 starting price for the R1.
It is also planning for the R3 mid-size crossover and the R3X performance vehicle. Both are expected to be cheaper than the R2.
After an extended period of steadily falling sales, Wall Street believes EV demand has returned. While lower prices address one part of the equation, the uptick may not be sustainable. It also might not benefit Rivian.
The growth of hybrid vehicles has been well-publicized. Primarily because of concerns over battery range and insufficient charging infrastructure, EV buyers are opting for hybrids because they can rely upon fossil fuels to get them where they are going.
That resulted in Toyota (NYSE:TM) emerging as the premier EV stock as it went all-in on hybrids.
If Rivian can’t surmount the hurdle of range anxiety, lower prices might not be enough to keep the momentum going.
Get Ready to Kick Rivian to the Curb
If Rivian stock soars in August above $20 a share and closes in on its previous high, that is about as good as it is going to get. It means all the good news was baked into the run higher.
There will be limited additional upside. Remember, Rivian is still losing a lot of money on every vehicle sold. Its per-vehicle losses in the first quarter exceeded $38,000. It might worsen after the second quarter, especially if sales don’t materialize.
Even though it will be difficult to dissuade shareholders from riding the wave higher, get ready to take the money and run. Let Rivian Automotive prove its path to profitability is real. There will always be an opportunity to get back in and you will likely be able do so at an even better price.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.