How much risk can you tolerate on a multi-year time frame? It’s time to conduct a gut-check, as electric vehicle (EV) manufacturer Rivian Automotive (NASDAQ:RIVN) is ambitious but not in an ideal capital position. Thus, RIVN stock could provide great wealth over the next five years, but investors should be cautious and maintain small position sizes.
Truly, Rivian Automotive is an EV maker like no other. You just never know what it might do next. For instance, Bloomberg just reported the company is preparing to potentially add an electric bike to its vehicle lineup.
Ambition and vision are fine, but Rivian will need capital to fund its operations over the coming months and years. However, it appears that Rivian is being proactive in cutting its costs. So, adventurous investors can still hold out hope for the company’s future.
It’s Not Catastrophic That Ford Is Trimming Its RIVN Stock Position
The Rivian-centered news that people are buzzing about is that Ford (NYSE:F) sold 91 million shares of RIVN stock in 2022. This must be a sign that Ford dislikes Rivian, right?
Not necessarily. First of all, it’s hard to blame Ford for taking some profits, as the company’s $1.2 billion position in Rivian had ballooned to “$3 billion in total proceeds,” per CNBC.
Besides, Ford still held approximately 11 million RIVN stock shares at the end of 2022. So, it’s not as if Ford just gave up on Rivian completely.
Meanwhile, another corporate giant is still in the trade. E-commerce giant Amazon (NASDAQ:AMZN) reportedly maintained its stake in Rivian and owns roughly 18% of the company — a $30 billion position, more or less.
Job Cuts Demonstrate Rivian’s Commitment to Financial Improvement
One thing any potential Rivian investor needs to understand is this is a speculative, early-stage company. Rivian had a modest objective of producing 25,000 vehicles last year and came close with 24,337 vehicles actually produced.
So, don’t expect Rivian to produce vehicles in vast quantities like the company’s bigger competitors can do. This is a multi-year story in progress; hence, a five-year target for RIVN stock is appropriate.
Honestly, Rivian will need some time to get its financial house in order. At least, we can say that Rivian is taking cost reduction seriously. The company eliminated 351 jobs in California around six months ago, and is now letting go of around 840 additional staff members.
CEO R.J. Scaringe assured the job cuts “would not affect manufacturing jobs at Rivian’s factory in Illinois,” according to CNBC. Certainly, Rivian isn’t the only automaker to reduce its headcount in recent months. It’s one way the company can shore up its capital position and thereby continue to fund its operations.
So, Where Will Rivian Be in 5 Years?
Without a crystal ball, there’s no telling where a speculative EV maker like Rivian will be in five years. However, I expect the company to ramp up its vehicle production with each passing year. And, if Rivian succeeds in selling e-bikes, that could provide a significant revenue source.
Therefore, it wouldn’t surprise me if RIVN stock goes from $20 to $200 in five years, especially if Rivian continues to take cost-cutting seriously. Just be sure to keep your share position small, as Rivian might fail to meet its objectives. Eventually, Rivian may become an EV-market dominator. Or, with bad luck and poor execution, it could cease to function as a going concern.
On the date of publication, David Moadel did not have (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.