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Motley Fool Issues Rare “All In” Buy Alert
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Rivian Automotive (RIVN -5.39%) shares broke below the $30 barrier today for only the third time in the past several months. As of 3:20 p.m. ET, the stock was trading slightly off the lows of the day, down 6%.
The stock dropped below $30 two prior times recently, when investors were worried the company might once again drop its 2022 production estimates. But when Rivian reported its third-quarter results last week, it had mostly good news for shareholders. Today’s dip had more to do with the competition than Rivian’s business itself, which could turn out to be even more challenging to the company’s future success.
Rivian is focusing on the pickup truck and SUV consumer segment, which separates it from most other EV start-ups. Even sector leader Tesla doesn’t expect to get into the pickup truck business until sometime next year. But an update from General Motors yesterday could mean significant competition for Rivian is coming ahead of schedule.
GM CEO Mary Barra told investors yesterday that the company expects profitability from its electric vehicle (EV) offerings to arrive years ahead of schedule. She said GM’s EV lineup should match the profitability of its internal combustion engine vehicles by 2025, partly thanks to incentives passed in the Inflation Reduction Act.
Image source: Rivian Automotive.
The GM products that will help provide those profits include the GMC Sierra and Chevrolet Silverado pickups, and Chevy Blazer and Equinox SUVs. It also has the all-electric GMC Hummer and Cadillac Lyriq on the higher end. All of those vehicles will be in direct competition to Rivian’s R1 platform pickup and SUV models.
Rivian has been reporting strong demand for its vehicles, but it says it only has cash and equivalents on its balance sheet to get it through 2025. Profitability is still a long way off, with Rivian only expecting to produce 25,000 electric vehicles this year.
If General Motors succeeds in turning profits from its EV models in 2025, it will have more capital available to push against competition like Rivian. Investors see that as a bit of a red flag for Rivian stock, especially knowing it will need to raise more capital around that same time.
Howard Smith has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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