LI - Why Is Rivian Stock Trading Higher While Chinese EV Stocks Struggle?
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It’s an inauspicious start to the week for Chinese electric vehicle stocks. Nio (NYSE:NIO), XPeng (NYSE:XPEV) and Li Auto (NASDAQ:LI) stock are trading deep in red. However, amidst the sea of red in the EV industry, Rivian Automotive (NASDAQ:RIVN) stock looks firm as it trades higher by 6% at market open.
Talking about Chinese EV stocks first, there are two factors contributing to the decline. With a renewed surge in Covid-19 cases, EV companies in China are struggling with supply chain issues.
Nio has already suspended production due to supply chain challenges. With inflationary pressure, Nio has also hiked prices and other EV makers in China are likely to follow. This can potentially impact deliveries growth.
Amidst these headwinds, what’s working for RIVN stock?
There are two important factors.
First and foremost, RIVN stock touched highs of $179 after listing in November 2021. A correction to current levels of $41.2 is already significant. RIVN stock is a potential value pick around these levels.
Furthermore, on April 5, Rivian announced that the company produced 2,553 vehicles and delivered 1,227 vehicles in first-quarter 2022. The numbers were in-line with the guidance. Rivian also believes that the company is on track to produce 25,000 vehicles in 2022.
Healthy production numbers and reaffirmation of the guidance has propped-up the stock. As investors cut positions from Chinese EV stocks, there is a case for further upside in RIVN stock along with the likes of Lucid (NASDAQ:LCID).
It’s also worth noting that Rivian currently has a production capacity of 150,000 vehicles. Capacity is expected to increase to 200,000 vehicles in 2023 and further to 400,000 vehicles in 2024. With ambitious growth plans, the worst of downside for RIVN stock might be over.
In terms of vehicles deliveries, growth is likely to sustain. As of March 2022, Rivian reported 83,000 pre-orders for R1. The initial order for 100,000 electric delivery vans from Amazon (NASDAQ:AMZN) also provides revenue visibility.
Overall, it seems that the positive momentum for RIVN stock will sustain after the big sell-off. Analysts have a median price target of $84 for the stock. Over the next 12-months, the stock can potentially double if the company continues to meet its production and delivery guidance.
On the date of publication, Faisal Humayun 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.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
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