RIVN Red Alert: Prepare to Sell Rivian Stock by August 2024

Rivian Automobiles (NASDAQ:RIVN) has doubled since its low in April and is now at January levels. Share prices are rising following the partnership with Volkswagen (OTCQB:VWAG), which could lead to the German automaker investing up to $5 billion in the electric SUV company.

Wall Street is also bullish on Rivian. TipRanks shows a bullish outlook and a one-year price target of $17, suggesting the stock is fairly valued. However, Canaccord analyst George Gianarakis raised his price target to $30 per share last month and calls the Volkswagen deal “monumental.”

However, analysts also expect Rivian to see a deterioration in its earnings in early August. The loss per share is expected to rise from $1.05 last year to $1.27. If the electric car maker can show a surprise improvement, the stock could continue to rise. It could even revisit the high of $28 per share reached last December.

Although Rivian stock is still 90% below its high following its 2021 IPO, the electric vehicle company is arguably in the best financial position it has ever been in.

So if Rivian stock does indeed rise sharply, that would be an excellent time to take your money out.

Rivian shares: Upswing ahead of earnings release

Rivian Automotive will release its second-quarter results in less than three weeks on August 6. Since the company has already released its production and delivery numbers for the quarter, there are no predictions as to what those will be. Rivian has sold many cars off dealer lots.

The electric carmaker delivered 13,790 SUVs, well above analysts’ expectations of 11,500 vehicles, while producing 9,612, a difference of 44%, meaning the company was able to offload a lot of unsold inventory.

But how these truck sales play out on the income statement will tell investors whether the company remains on track to deliver “modest” gross profitability.

The electric truck maker’s results are one reason Wall Street is once again bullish on electric car stocks. But the sales are likely driven by price cuts, suggesting margins will decline before they improve.

We know that Rivian and the industry have been cutting prices to stimulate demand. Tesla (NASDAQ:TSL) lowered the prices of its Model 3 and Model Y vehicles and offered additional incentives to sell them.

Although shipments fell 5% year-over-year, the company also sold much more than analysts expected. Lucid Group (NASDAQ:LCID) saw a 1% increase in sales due to price reductions, but dealer order backlogs remain high.

Rivian’s own inventory reduction, if achieved through deeper-than-expected cuts, could push back the electric car maker’s profitability target. But it could also set the stage for the next phase of growth.

Lower prices may not be enough

Rivian is preparing to launch its new, more affordable R2 SUV. It will seat five people and cost around $45,000, significantly cheaper than the $70,000 starting price of the R1.

The mid-range crossover R3 and the high-performance vehicle R3X are also planned. Both are expected to be cheaper than the R2.

After a long period of steadily declining sales, Wall Street believes demand for electric vehicles has returned. While lower prices are part of the equation, the rebound may not be sustainable. Rivian may not benefit from it either.

The rise of hybrid vehicles is on everyone’s lips. Mainly due to concerns about battery range and inadequate charging infrastructure, electric vehicle buyers are opting for hybrid vehicles because they can rely on fossil fuels to get to their destination.

The result was Toyota (NYSE:TM) became the leading electric vehicle stock as the company focused entirely on hybrid propulsion.

If Rivian can’t overcome the range anxiety hurdle, lower prices may not be enough to maintain momentum.

Get ready to push Rivian to the brink

If Rivian stock rises above $20 per share in August and approaches its previous high, that’s about as good as it gets. It means all the good news has been factored into the rise.

The upside is limited. It is important to remember that Rivian is still losing a lot of money on each vehicle it sells. Losses per vehicle in the first quarter exceeded $38,000. Things could get even worse after the second quarter, especially if sales do not materialize.

While it will be difficult to dissuade shareholders from riding the wave, be prepared to take the money and run. Let Rivian Automotive prove that its path to profitability is real. There will always be an opportunity to get back in, and you’ll likely be able to do so at an even better price.

At the time of publication, Rich Duprey did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies.

At the time of publication, the editor in charge did not own, directly or indirectly, any interests in the securities mentioned in this article.