Rivian’s Sympathy Slump: A Rare Opportunity for Contrarian Investors


  • Rivian Automotive (RIVN) took Tesla (TSLA) CEO Elon Musk’s advice and implemented a massive cost-cutting measure.
  • However, Rivian stock declined recently because rival electric vehicle manufacturer Fisker is reportedly considering bankruptcy proceedings.
  • Investors shouldn’t lose faith in Rivian Automotive, and ought to buy any and all dips in RIVN stock.
RIVN stock - Rivian’s Sympathy Slump: A Rare Opportunity for Contrarian Investors

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Do you like to buy what others are selling? If so, then there’s a blood-in-the-streets moment with electric vehicle manufacturer Rivian Automotive (NASDAQ:RIVN) for you to take advantage of. When you find out why some short-term traders panic-sold RIVN stock, you should be excited about this rare opportunity.

It’s amazing, how the market can be so fickle sometimes. One day, stock traders like Rivian Automotive because the company announced its plans to introduce an affordable $45,000 electric SUV, the R2, in 2026.

But then, another day comes and people are dumping Rivian stock. However, I encourage you to just relax, learn the facts and stay in the trade. Better yet, pick up some Rivian shares on the cheap as the company isn’t having major problems, even if a competing automaker might be.

Rivian Automotive Seemingly Takes Elon Musk’s Advice

Not long ago, Tesla (NASDAQ:TSLA) CEO Elon Musk advised that Rivian Automotive needs to “cut costs massively.” To Rivian’s credit, the company actually followed Musk’s advice.

Or, maybe it’s just happenstance that Rivian Automotive decided to pause construction of its planned Georgia-based EV production factory. It’s possible that Rivian already intended to do this, irrespective of Musk’s advice.

Either way, it’s a smart move. By putting its Georgia production plant plans on hold, Rivian Automotive expects to get the affordable R2 SUV to the market faster. Plus, Rivian anticipates that it will save $2.25 billion worth of capital spending by halting the Georgia factory.

It makes perfect sense for Rivian Automotive to focus its efforts on the R2 now, instead of on building the Georgia production plant. As Reuters reported, the R2 SUV “racked up tens of thousands of reservations within hours of its launch” – a good sign, you must admit.

You Won’t Believe the Reason RIVN Stock Dropped

Thursday, March 14 was a rough day for Rivian Automotive’s shareholders. That day, RIVN stock fell 8.71% to $10.69.

Something bad must have happened to Rivian, right? Actually, that’s not the case. Instead, it was a case of what I call the “sympathy effect.” This is when nervous investors panic-sell a stock simply because another stock in the same market sector dropped sharply.

Personally, I relish “sympathy effect” opportunities. In this case, Rivian stock declined 8.71% mainly because Fisker (NYSE:FSR), a competing EV manufacturer, is reportedly considering filing for bankruptcy proceedings.

As The Wall Street Journal put it, Rivian Automotive “has hired restructuring advisers to assist with a possible bankruptcy filing, according to people familiar with the matter.” Consequently, Fisker stock plummeted 51.94% to 15 cents (or more precisely, 15.5 cents) on March 14.

Let’s look at this situation sensibly. Rivian Automotive, like Fisker, is an EV startup. However, this doesn’t mean Rivian will end up like Fisker. Rivian recently announced not just one, but three new upcoming EV models, including the R2. Does this sound like a company that’s about to declare bankruptcy?

RIVN Stock: When They Sell It, You Can Buy It

You should really thank your lucky stars for the “sympathy effect.” Volatility brings opportunity, especially when it’s based on irrational fears.

There’s no evidence that Rivian Automotive will end up in the same predicament as Fisker. In time, Rivian’s affordable R2 SUV could be a game changer in the EV industry. Therefore, the smart move is to grab some RIVN stock while its down – and be grateful that traders can be unreasonable sometimes.

On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

Article printed from InvestorPlace Media, https://investorplace.com/2024/03/rivians-sympathy-slump-a-rare-opportunity-for-contrarian-investors/.

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