Rivian (RIVN) took a nosedive yesterday…
The newly public, Amazon-backed electric-vehicle (EV) company declined by 3% on Thursday following news that Amazon (AMZN) would partner with auto manufacturer Stellantis (STLA).
Prior to Amazon’s announcement, Rivian had named the e-commerce and cloud giant as its preferred cloud-service provider. Rivian had also reached a deal to manufacture 100,000 EVs for Amazon by 2030.
However, with Stellantis now entering the fray, investors are concerned that the new partnership could disrupt some of Rivian’s growth prospects.
While Amazon has not ended its agreement with Rivian, the Stellantis deal means the legacy auto manufacturer will similarly benefit from Amazon’s cloud services and in-car dashboard software – as it recently announced that it would rebrand Chrysler as an EV company.
Still, this may not be as much of a threat as some may fear. Over the past few years, Stellantis made a series of attempts to revitalize its Chrysler brand. Yet, the automaker has continued to make little progress in gaining widespread popularity.
And even though the news may be having an impact on Rivian, its decline in share value could be largely associated with a broader trend…
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For the week, Rivian stock is down by more than 15%. The company’s shares are also 51% lower than their peak value in November.
While there are a variety of reasons as to why this could be happening, the most likely one is the fact that investors are shifting away from riskier investments – as well as the technology market.
This means that even though long-term profit tailwinds remain in place for Rivian and other EV stocks, investors are shifting over to hedges to protect their portfolios against inflation and rising interest rates. In turn, stocks like Rivian’s are getting pummeled.
Nevertheless, this could be more a near- to medium-term issue for the company…
These types of declines are already fairly common for newly public stocks. But Rivian’s share value is still relatively high despite being lower than its initial public offering price.
This suggests that the company remains well-positioned to compete against EV giant Tesla (TSLA), as the cash it has raised should enable it to rapidly manufacture its R1T and R1S pickup trucks and SUVs.
Meanwhile, Amazon’s backing isn’t going to disappear. But even if it were to happen, Rivian is already backed by Ford Motor (F) and T. Rowe Price (TROW) as well. And the EV manufacturer has indicated that long-term sustainability will mean Rivian will continue to pursue collaborations with a variety of businesses.
So, despite the stock’s decline, the fact remains that it has strong backing with delivery deals already within its pipeline. And Rivian should continue to grow in the years ahead as a result.
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St. Paul Research
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