Is Rivian Stock a Bargain Buy With 60% Upside Potential?

Rivian Automotive Today

RIVN

Rivian Automotive

$11.03

-0.81 (-6.84%)

(As of 09/25/2024 ET)

52-Week Range

$8.26

▼

$24.87

Price Target

$18.09

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After a promising start to the summer, shares of electric vehicle (EV) maker Rivian Automotive, Inc. NASDAQ: RIVN have been struggling for upward momentum. A solid 125% rally from April through July looked promising, especially as the stock was coming off an all-time low. However, a weaker-than-expected earnings report in early August was too much for the stock to handle. 

While Rivian managed to beat analyst expectations and deliver an EPS number not as deep in the red as feared, its revenue was off the beat and fully flat for the year. Unfortunately, this report came out right as the broader equity market was having some of its worst days in recent years. For example, the benchmark S&P 500 index had shed 10% in just a matter of weeks, and concerns were mounting about the Fed’s ability to deliver a soft landing. 

Tricky Trading: Rivian and Tesla Stocks Take Diverging Paths

Some dodgy-looking jobs reports had suggested that they’d been overly hawkish with regard to interest rates and might even have been on track to have caused a recession. But these concerns have all but dissipated in the month since, with last week’s announcement of the first rate cut in four years showing that we’re finally coming out the other side.

However, while the broader market has managed to turn back up north, with the S&P 500 hitting a record high during Monday’s session, shares of Rivian have not gone with them. If anything, they’ve given up more ground, hitting their lowest point since June during yesterday’s session. 

This will be a frustrating pill for investors to swallow, especially as the likes of the king of EVs, Tesla, Inc. NASDAQ: TSLA, have seen their shares gain. For much of the past few years, shares of Rivian have largely traded hand-in-hand with Tesla, rallying into the end of last year, for example, then selling off through April. Both stocks rallied into July and then sold off at the start of August, but in the six weeks since, their shares have taken very different paths. 

Divergence From Peers: Rivian Falls 20% While Tesla Gains 35%

If we take August 5th, the stock market’s worst day during the summer volatility, as a starting point, we can see that Tesla shares have gained 35%. Based on the strong correlation between the two stocks in the months and years gone by, it would not be unreasonable to expect Rivian to be up at least 10-20%, not a bit more. All other things being equal, Rivian, as the younger and more growth-focused stock, is more favorably positioned to benefit from the falling interest rates that have just been announced. But instead, their shares have fallen nearly 20% in those six weeks. 

However, for investors with an appetite for risk and who believe in Rivian’s long-term potential, this could be a serious buying opportunity. At least, this is the opinion of the team at Cantor Fitzgerald, who just yesterday reiterated their Overweight rating on Rivian shares, along with their price target of $19.

Rivian’s 60% Upside: A Strong Entry Opportunity for Investors

Considering Rivian closed out yesterday’s sessions trading below $12 a share, that’s pointing to a very tempting targeted upside of nearly 60%. Theirs is the latest in a long row of bullish analyst stances in recent weeks and builds on the $18 and $15 price targets given to Rivian shares last month by the teams at Needham & Company and Royal Bank of Canada, respectively. 

Further support for the upside case comes from the fact that, technically speaking, at least, Rivian shares are bordering on extremely oversold territory. This is based on the stock’s relative strength index or RSI. The RSI is a popular technical indicator that looks at a stock’s recent trading history, then spits out a number that ranges between 0-100. Anything above 70 suggests the stock is extremely overbought, while the opposite is true when it’s below 30. 

At just 36, Rivian shares are definitely in oversold territory. If you’re bullish on their long-term prospects and like the look of Cantor Fitzgerald’s 60% upside, then there’s every reason to think these are some bargain prices on offer.

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