Among the most-followed names in the electric vehicle space, admittedly Rivian Automotive (NASDAQ:RIVN) is in a much better place compared to most of its early-stage EV maker peers. This has likely played a role in mitigating price declines for RIVN stock.
Although shares have declined in price by around 51% over the past twelve months, peers like Lucid Group (NASDAQ:LCID), Mullen Automotive (NASDAQ:MULN), and others are down by far larger amounts over this same time frame.
Yet while Rivian has fewer of the problems plaguing the fledgling upstarts in this fast-growing industry, one colossal problem keeps getting worse. Barring a fast resolution to this issue (which is unlikely), shares not only may have little room to run from current prices (around $14 per share).
The stock may be at risk of additional price declines, unless upcoming data indicates things are moving in the right direction.
Well Ahead of the Rest of the Pack
Among the companies competing for the EV crown currently held by Tesla (NASDAQ:TSLA), Rivian is the default front-runner. At least, based on the current troublesome state of Rivian’s U.S.-based, publicly traded competitors.
For one, this EV company is (for now) adequately capitalized. Other EV contenders are burning through cash too fast and are looking to raise more of it. Some have been successful in shoring up their reserves. Lucid, for instance, has been able to once again tap into the deep pockets of its majority shareholder, Saudi Arabia’s Public Investment Fund.
Others, however, haven’t been as fortunate. Lordstown Motors (NASDAQ:RIDE) just this week filed for bankruptcy, largely due to an unconsummated financing deal that’s now the subject of litigation. Besides adequate capitalization, Rivian also appears to be in the lead in production.
Although only time will tell whether the company meets its 50,000 vehicle production goal this year, even moderately missing this target will still likely put it ahead of Lucid and the other “also-rans.”
Again, though, while facing fewer problems, there’s still a big one that threatens the future performance of RIVN stock.
The Competition is Leaving Rivian in the Dust
Previously, I have laid out a bear case for Rivian, based on the potential negative impact of competition. Specifically, competition from incumbent U.S. automakers like Ford (NYSE:F). There was much to back up this argument.
For instance, the fact that incumbent-built electric trucks qualify for the latest EV tax credit, and are far cheaper than most of Rivian’s electric truck offerings. More recently, other factors emerge pointing to Rivian being at a competitive disadvantage.
A good example is with General Motors’ (NYSE:GM) electric truck contender, the Chevrolet Silverado EV Work Truck. Not only does this vehicle handily beat Rivian’s R1T on price. The Silverado has far greater range than the other electric pickups out there; the R1T included.
It’s not a hidden secret that competition from Ford and GM is having a negative impact on Rivian truck demand. With this, RIVN stock bulls are now turning to a new narrative.
Namely, that the company will make up for sagging R1T demand, for supposed booming demand for the company’s R1S SUV model. Still, it’s unclear whether this vehicle, plus lower-priced models scheduled to debut next year, will save the day.
Bottom Line
While Rivian CFO Claire McDonough has been touting that strong demand remains, other factors suggest the opposite. Last quarter, Rivian produced more vehicles than it sold. This month, the company resorted to unloading excess inventory through a factory direct sale.
With this, it still seems wise to maintain a “show me” stance on Rivian. That said, some upcoming data could prove me wrong. Perhaps, even cause me to adjust my current view on the stock.
I’m talking about Rivian’s Q2 delivery and fiscal results, both of which will drop next month. These may indicate that McDonough is on the money with her recent remarks. Updates to production/sales guidance could also paint a better picture of whether the competition issue is officially in the rearview mirror.
Until then, however, err on the side of caution with RIVN stock.
RIVN stock earns a D rating in Portfolio Grader.
On the date of publication, Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.