Why Rivian Shares Are Sinking Today

Rivian Automotive (RIVN -1.98%) shares are bucking an uptrend in electric vehicle (EV) stocks Monday. There are a couple of reasons for that. While some EV names are riding bullish sentiment on Wall Street, Rivian’s shares dropped by as much as 5% in early trading. As of 12:40 p.m. ET, the stock was still down by 2.4% for the day.

Rivian is a unique EV maker

Rivian shares have now dropped by about 30% year to date. The company has some unique features among start-up EV makers, though. In addition to offering fully electric consumer pickup trucks and SUVs, Rivian makes commercial delivery vans. That market looks to be growing quickly, but its consumer business is what has shares dropping Monday.

The Tesla (TSLA -2.59%) Model Y is the best-selling vehicle in the world now. That smaller SUV may not be in direct competition with Rivian’s R1S for some EV buyers. But on Monday, Tesla announced it was cutting its prices in the U.S. for two versions of the Model Y by $1,000 for the remainder of February. That may entice some potential R1S customers to consider the Model Y instead.

Additionally, Barclays analyst Dan Levy downgraded Rivian shares to the equivalent of a hold Monday, according to Barron’s. He also slashed his firm’s price target on the stock from $25 per share down to $16 per share.

Is Rivian stock a buy?

Levy isn’t down on Rivian’s EV offerings. But he notes there is pressure on demand for EVs in general as the pace of sales growth slows in the U.S. As evidenced by Tesla’s recent price move, the analyst assumes that will mean lower pricing broadly, which will increase Rivian’s near-term losses.

While Rivian ended the third quarter with more than $9 billion in cash and equivalents on its books, the company used more than $5 billion in growth capital last year. It will likely need to raise fresh funds, as management plans to spend another nearly $5 billion in 2024 on building its second manufacturing facility.

Investors in Rivian need to understand that the company’s path toward profitability will take several years. That helps explain why Levy thinks the stock is a hold for now. But long-term thinking investors might want to dip their toes in with the stock down about 40% from its 2023 highs. Investors will get more data when Rivian reports its fourth-quarter results on Feb. 21.

Howard Smith has positions in Rivian Automotive and Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.

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