Rivian stock price has been in a consolidation phase in the past few months. The shares were trading at $29.75 on Friday, which is in the same range it has been in the past few months. It has plunged by more than 83% from its all-time high, giving it a market cap of more than $27 billion. At its peak, the company was valued at over $100 billion, making it more valuable than General Motors and Ford.
Rivian faces significant headwinds
Rivian is one of the biggest Tesla challengers in the world. The firm has remarkably designed and started selling electric trucks that have a good reputation. In the most recent quarter, the company produced 7,300 vehicles across its R1T, R1S and EDV lines. This is a remarkable performance for a company that started delivering vehicles recently. It also has over 114k net preorders for its R1 vehicles.
The company’s revenue jumped to $536 million. As the cost of doing business rose, the firm recorded a negative gross profit of $917 million. Operating expenses jumped by $161 million while its adjusted EBITDA was negative $1.3 billion. The firm reaffirmed its EBITDA guidance to negative $5.45 billion. Most EV companies tend to remain in the loss-making territory for years.
Rivian stock price has also struggled because of the rising competition in its key businesses. The biggest competition is coming from established brands like General Motors and Ford. After the product recall a few months ago, many customers are expected to shift to other EV trucks.
Rivian positives
On a positive side, Rivian, unlike other EV companies, has a strong balance sheet with over $14 billion in cash and limited debt. Further, the company has a long relationship with Amazon, which is already using its EDV trucks for deliveries. Amazon has placed an order for over 100k trucks from the company.
Third, Rivian stock price will likely benefit from the recently passed Inflation Reduction Act and the fact that supply chains have improved dramatically. Therefore, from a fundamental perspective, I think that it is a good investment since conditions are set to improve.
On the negative side, analysts have trimmed their estimates. Those from Morgan Stanley, DA Davidson, Wells Fargo, RBC, and Canaccord Genuity have slashed their estimates to $55, $23, $32, $50, and $55.
Rivian stock price forecast 2023
The daily chart shows that the RIVN stock price has been under pressure this year as concerns about the company continued. Most recently, it has formed a descending channel pattern that is shown in green. It has also moved slightly below the 25-day and 50-day moving averages. The shares have also formed an inverted head and shoulders pattern.
I suspect that Rivian shares will have a bullish breakout in 2023 as the supply chain improves. If this happens, the stock will likely rally back to $50, which is about 71% above the current level. A drop below the support at $20 will invalidate the bearish view.
