Rivian Stock Price Prediction: Unprecedented Margin Contraction

Summary:
• What is the outlook of the Rivian stock price as investors brace for an unprecedented margin expansion as commodity prices rise.

Electric vehicle (EV) stocks have struggled recently as concerns about inflation remain. This year, the Rivian (RIVN) stock price has been among the worst-performing EV stock. It has dropped to $45, which is a remarkable collapse. At its peak, it was trading at an all-time high of about $180. At the time, it was more valuable than giant companies like General Motors and Ford.

Rivian margin contraction

Like all other automakers, EV companies rely on hundreds of parts that cost thousands of dollars per car. The most expensive cost of EVs is the battery, which is made up of top metals like nickel, lithium, cobalt, manganese, and zinc, among others. Sadly, in the past few months, the prices of these metals have surged because of the role of Russia in the business.

EVs also have other inputs like aluminium, steel, and copper. Like nickel, these metals have also rallied in because of the sanctions on Russia. At the same time, there have been substantial shipping costs because of the rising cost of energy and supply chain disruptions. All these factors explain why the Rivian stock price has dropped sharply this year.

Rivian has been attempting to solve some of these challenges. One way of doing this is by raising the prices of its truck, an action that led to an uproar. In addition, analysts estimated that the order cancellations could cost the company over $850 million. This is a substantial amount for a company with a limited path to profitability in the near term.

In addition to order cancellations, Rivian could struggle to get more orders for its cars as customers opt for cheaper EVs from companies like Ford and GM. This explains why most analysts like those from Mizuho, Wedbush, RBC, Baird, and Barclays lowered their estimates for the company. Another reason is that the RIVN share price could struggle as the Fed embraces a more hawkish tone.

Rivian stock price forecast

The Rivian share price has been in a strong bearish trend. As a result, it has managed to form a series of lower lows as it struggles to find bids. Still, a closer look shows that it has formed strong support at about $33 and has recently retested the support at $50, which was the lowest level on January 28. 

The stock’s Average True Range has dropped, signalling its volatility has dropped. At the same time, the Smart Money Index (SMI) has also dropped. Therefore, while the overall trend is bearish, a rebound above $50 cannot be ruled out for now. However, this view will be invalid if it drops below $40.