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As RIVN’s stock stumbles, let it boil down to your purchase price


Eternity begins now: this is the credo of Rivien Automobile (NASDAQ:RIVN). Now that the company has finalized its initial public offering (IPO), RIVN stock is available for public trading and you can try out the stocks of this ambitious electric vehicle (EV) start-up.

Source: James Yarbrough / Shutterstock.com

Rivian specializes in large vehicles, especially trucks and SUVs. Large vehicles can be cruelty-free, as the interiors of Rivian’s vehicles are made from 100% animal-free materials.

Not only that, but Rivian’s battery packs are designed to be easily removed from vehicles and can be recycled or used in “second life” applications such as stationary storage.

The uniqueness of Rivian’s vehicles has created a certain buzz among investors; there may have been too much buzz. Potential shareholders should exercise caution, because anything that goes up too quickly in the market is likely to fall at the worst time.

A closer look at RIVN’s stock

A surprising thing happened with the RIVN stock. After the company valued its shares for IPO, the stock rose for five consecutive trading days.

How unusual is that? Over the past five years and among a dataset of over 200 IPOs, Dow Jones Market Data found just seven other cases of billion-dollar U.S. IPOs that had a similar winning streak.

Not that there is anything wrong with having a post-IPO winning streak. Everything is fine. Yet sometimes gatherings can just get out of hand.

Gravity finally took over on November 17, when RIVN stock fell 18% in a single trading session.

Even that day, however, the share price was still high as it settled into the $ 140 mark. Yesterday stocks fell and today they are up 10% to $ 135 by mid-afternoon.

Keep in mind, however, that Rivian’s IPO was priced at just $ 78 per share, and the stock was opened for public trading at $ 106.75 on November 10.

Therefore, it is reasonable to conclude that RIVN stock would still be expensive in the $ 140 or even $ 130. So don’t hesitate to wait for it to arrive at a more reasonable price before taking a long position on the name.

Big funders

Adventurer: This is the one-word phrase I would use to describe Rivian as a company, as well as its vehicles.

Adventure is really what sets Rivian apart. We all know there are a lot of EV startups on Wall Street right now, but this one has a different attitude and tone.

Do not mistake yourself ; RIVN stock is far from a perfect investment. Rivian is, after all, what is politely called a “pre-income business,” and it just launched its first vehicle in September.

This is why the stock price action concerned me so much. Rivian hasn’t really accomplished enough to justify the surge of investor enthusiasm.

On the other hand, Rivian has big backers. These included Amazon (NASDAQ:AMZN) with a 22.4% stake, Price T. Rowe (NASDAQ:TROW) with 18.8% and Ford (NYSE:F) with 14.4%.

Explore the possibilities

Now, these businesses are not run by models. Without a doubt, they did their due diligence before pouring tens of millions of dollars into Rivian.

Maybe they appreciate the rugged features of Rivian’s vehicles, like the R1T pickup truck.

This Rivian EV model offers an estimated range of 314 miles by the EPA when paired with 21-inch wheels. And apparently, an R1T with a range of over 400 miles will be available in January 2022.

Or maybe Rivian’s full-scale supporters are enamored with the R1S SUV, which supposedly allows its drivers to “drive through more than 3 feet of water.” [and] Rock crawl at a 100% rating. Plus, the R1S can get you from zero to 60 miles per hour in three seconds, depending on your tire choice. It’s not too bad, I have to admit.

The bottom line

With both Ford and Amazon backing Rivian, it’s hard to ignore the potential of this fascinating company. But sensible investors don’t have to jump right into RIVN stock. Patience will usually reward people who let stocks drop to a preselected level.

So feel free to explore for yourself the possibilities of RIVN stock at a lower price.

At the date of publication, David Moadel did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, submitted to InvestorPlace.com Publication guidelines.


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