Stocks to buy

Wait for the Right Opportunity to Buy Rivian Stock

Rivian Automotive (NASDAQ:RIVN) is the latest famous electric vehicle (EV) maker to make an initial public offering (IPO) in the market. RIVN stock has proven to be quite volatile. Opening well above its IPO price at around $104 during its first trading day, RIVN stock soon rocketed to an all-time high of $179.47.

A Rivian (RIVN) sign out front of an Illinois manufacturing plant.

Source: James Yarbrough / Shutterstock.com

However, the stock soon entered into a downtrend and is now $122.14 per share. Looking at the trajectory of other high-flying IPOs, I wouldn’t be surprised to see RIVN stock head even lower.

Rivian offers the possibility of long-term wealth to investors. Yet now is not the ideal time to enter.

Rivian Has Developed a Superior Truck

By all accounts, Rivian has developed quite a unique truck. The R1T truck has four permanent-magnet motors mounted at each wheel. This allows the vehicle to produce 835 horsepower and 908 lb-ft of torque. It has a large 135-KW battery pack capable of charging at speeds of 190-kW to 300-kW.

The truck has a range of about 314 miles. This is within industry standards and reasonable. Rivian’s truck has a longer range than frenemy Ford Motors’ (NYSE:F) upcoming F-150 Lightning. For an extra $10,000, you can upgrade the R1T truck to a 180-kW battery to extend the range past 400 miles. This is a longer range than the $112,595 Hummer EV, which manages 350 miles on a 200-kW battery.

Website Motortrend rated the R1T the fastest pickup truck by a country mile. It is significantly quicker than the now second place Ram 1500 TRX.

According to the website:

“The R1T is quicker than our previous record holder, the Ram 1500 TRX, not just because it makes more power but also because of the way electric motors deliver that power. The Ram 1500 TRX needs to send its engine’s output through a transmission and transfer case to its four wheels, spinning through each gear until its 5,800-rpm redline before shifting and starting the whole process all over again. The R1T’s motors, on the other hand, are capable of delivering all of their torque at 0 rpm, only beginning to wane as the motors approach about 18,500 rpm.”

These specs make the Rivian truck a true competitor in the industry.

Lack of Positive Short-term Catalysts for RIVN Stock

The specs of the R1T pick-up give Rivian a good chance of disrupting the industry. It will then all boil down to execution risk. Will Rivian be able to scale its production in order to meet future demand? I’ve covered another stock, Lucid Motors (NASDAQ:LCID), that is in a similar situation. The main difference between Rivian and Lucid is that there are no new positive catalysts on the horizon for Rivian.

Despite being the first electric pick-up to market, Rivian is not immune to the difficulties of scaling production. The company had originally committed to a November delivery for the first batch of vehicles. However, the company has been contacting customers to inform them of a change in the delivery date. Rumors are that the delivery date has been pushed back to sometime in early 2022.

Another blow for Rivian bulls is the recently announced cancelation of its project to jointly develop an EV with Ford. This puts the final nail in the coffin of the Ford-Rivian partnership. Ford has decided to attempt to tackle the EV space on its own as it targets to produce 600,000 vehicles per year by 2023. This is a major blow to Rivian as a partnership with Ford would have allowed the company to quickly scale up its manufacturing.

Your Takeaway

Given the lack of positive news on the horizon, unless we get some surprise announcement, I expect RIVN stock to continue its downward trend.

Furthermore, the company very recently had its IPO. Therefore, there should be a lock-up period of 180 days. Once the lock-up period expires, I expect heavy selling of RIVN stock not just from insiders but also from the large institutions that invested pre-IPO. Rivian raised roughly $8 billion since 2019, including a $2.65 billion funding round led by T. Rowe Price in early 2021.

I like Rivian as a long-term play, but would not purchase at these price levels.

On the date of publication, Joseph Nograles 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.

Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a wide variety of industries from tech to consulting with one of the “big four.” He has always enjoyed analyzing businesses and has been a CFA charterholder for nearly a decade now. 

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