While the major indices have been choppy over the past five sessions, Rivian Automotive (NASDAQ:RIVN) during the same period has been on a run. Friday has so far proven no different, with RIVN stock gaining over 17% in the late afternoon hours. Fundamentally, strong deliveries continue to bolster the electric vehicle upstart, with investors hoping that the narrative stays true.
Earlier this week, The Wall Street Journal reported that the Irvine, California-based EV manufacturer delivered 12,640 vehicles for the quarter ended June 30. Significantly, that’s more than the 11,000 deliveries that analysts anticipated, per a FactSet poll. In the previous quarter, Rivian delivered 8,000 units and just under 4,500 one year ago.
Unsurprisingly, retail investors lit up the board, sending RIVN stock up over 54% during the trailing five sessions. For the month, shares find themselves up over 81% while on a year-to-date basis, they’ve gained a remarkable 44%.
Fueling the robust rally is Wedbush Securities analyst Dan Ives, who believes Rivian finally turned a corner regarding execution of its longer-term business model. Previously, RIVN stock frustrated investors with the underlying company hampered with excuses as well as supply chain challenges.
“Demand remains firm for the company’s unique EV model lineup, while production appears to now be on the road to success as seen with stronger deliveries in 2Q,” Ives noted.
Subsequently, Wedbush maintains its “outperform” rating on RIVN stock. However, the firm also raised its price target to $30 from $25, reflecting confidence that Rivian will continue hitting or exceeding its delivery targets.
The Narrative Needs to Make Good for RIVN Stock
On paper, retail investors couldn’t ask for a better framework. Not too long ago, RIVN stock was still staring at double-digit losses for the year. As stated before, this particular narrative has been flipped. However, the risk moving forward is that Rivian must continue justifying the current rally with substantive data.
From Wedbush’s perspective, the production ramp along with cost optimization efforts should translate into better earnings. Also, Rivian’s partnership with Amazon (NASDAQ:AMZN) in the European market may boost the international story. However, one of the prior headwinds targeting RIVN stock and its peers was that narratives seemingly couldn’t convert to substance.
Presumably, then, Rivian must continue to make good on its rejuvenated profile. As InvestorPlace’s Thomas Niel mentioned early last month, Rivian suffers from cash burn issues. It might not be as bad as some of its rivals. Nevertheless, if hiccups occur down the line, it wouldn’t be surprising to see RIVN stock correct sharply.
As well, the economy must cooperate, which is hardly a given. Regarding the aforementioned cost optimization initiative, Rivian earlier made news with its cheaper dual-motor configuration (as opposed to the premium quad-motor setup). From base model quad-motor version to the dual-motor iteration, the price tag drops from $90,315 to $73,000.
From a percentage discount angle, that’s a massive saving. However, with the real median household income in 2021 sitting at $70,784, that’s also a pipedream vehicle for many drivers.
Why It Matters
Although Wedbush’s latest price target implies about 20% upside for RIVN stock, other analysts remain presently unready to join in on the optimism. True, Rivian carries a moderate buy consensus view among 16 analysts over the past three months. However, their average price target lands at $23.50, implying almost 6% downside.
On the date of publication, Josh Enomoto did not have (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.
