The Recovery in RIVN Stock Could Run Out of Range

After a rough few weeks, Rivian Automotive (NASDAQ:RIVN) — like other major electric vehicle (EV) stocks — has started to bounce back. Starting on Jan. 31 when it surged 15%, RIVN stock has been trending higher. After falling to a low of around $50 per share, the stock is back to the $64 mark.

As such, it may seem like the worst is over for this EV maker. However, it may not be a quick trip back to triple-digit prices. True, much of the recent plunge in EV plays stemmed from investors “selling the news” after Tesla (NASDAQ:TSLA) reported earnings. But don’t forget that looming rate hikes have also played a role in the selloff. With rates set to rise starting next month and the potential for more hikes than expected? Excitement for growth stocks may fail to return with full force.

Admittedly, it’s possible rate hikes won’t be as bad as some analysts currently forecast. Even then, though, a full recovery for the sector may be elusive. Instead, names like Rivian could at best see more modest returns ahead.

The Latest with RIVN Stock

Although shares are up in recent days, RIVN stock is still down more than 38% since the start of 2022. That’s a sharp decline, even among EV plays that have been knocked down by the factors mentioned above. For example, Lucid Group (NASDAQ:LCID) is down just 27% year-to-date (YTD). Plus, some EV plays like Fisker (NYSE:FSR) — which have been deemed by many as “also-rans” — are down by a smaller amount, too. Right now, FSR stock is down by 27% YTD.

So, why has the drop in RIVN been more outsized than with its peers? It may have to do with the off-the-charts hype surrounding Rivian at the time of its initial public offering (IPO). Besides the market cooling its jets when it comes to EV excitement, negative developments have dented confidence that the company is another Tesla in the making.

What are some of these negative developments? For one, Rivian missed its production target for 2021. Additionally, Amazon (NASDAQ:AMZN) decided it would not depend completely on the company’s EVs. As I put it in my last article, the market placed Rivian in the winner’s circle well before it even crossed the finished line. Realizing this was premature, it’s possible investors have pushed the stock down to a greater extent.

That said, shares could still drop further if rate hike fears heighten again. And even if that doesn’t happen, more moderate enthusiasm for EV stocks could limit a potential bounce-back.

Moving Back Above $100 Could Prove Tough

When it comes to a RIVN stock bounce-back, two things could stand in its way. What’s more, the first factor could impact the recovery prospects of EV stocks across the board.

After the selloff, it may seem like the market has fully absorbed forthcoming rate increases. Yet, as analysts raise their rate-hike projections? It could be risky to assume the hikes are already priced-in. Despite a double-digit percentage plunge last month, growth stocks could take another dive. For Rivian, that would mean a trip back to $50 — and possibly to levels lower than that.

Then again, it’s not a lock that the U.S. Federal Reserve will get even more hawkish from here. What we’re expecting now could be the full extent of its monetary policy changes. With this, growth stocks could continue to recover. Still, this second factor could prevent a repeat of the “EV mania” that is likely necessary to rev up RIVN stock again.

What could happen to EV plays if the mania doesn’t happen after the market stabilizes? The market could instead decide that near-term success is already priced-in. For Rivian, that means hitting 40,000 deliveries this year and 100,000 in 2023. In order to move higher, the company may need to deliver results above and beyond these projections.

The Bottom Line on Rivian Automotive

I’m not the only one who believes the runway for Rivian may be much shorter than currently expected. For instance, sell-side analyst Ryan Brinkman recently cut his price target by $20 to $84 per share. Brinkman maintained a “hold” rating for the shares.

There will be several challenges for returning to “EV mania.” All told, if you’re buying RIVN stock in hopes of a fast rebound, you may be disappointed.

On the date of publication, Thomas Niel did not hold (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.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

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