Rivian Automotive (NASDAQ:RIVN) stock is rising because of rumor and conjecture. Don’t buy it. The electric vehicle manufacturer still has poor financials amid an ailing industry. With EVs likely to report lower growth this year than last year, there is little reason to expect Rivian to buck the trend.
Although the EV stock is generating support, buying RIVN stock without firm commitments is just gambling. If there is something there, investors will have plenty of time to buy in later. But because it appears to be more smoke than fire, you will be better off sitting on the sidelines.
Wall Street Take Notice
Wall Street is changing its tune about Rivian. Morgan Stanley analyst Adam Jonas recently met with management and came away impressed. He said Rivian Automotive was “uniquely positioned within autos (other than Tesla (NASDAQ:TSLA)) on scaling a fully integrated software stack critical to unlocking the AI opportunity.”
Yet he offers caution, too. He notes the EV maker’s stock “is a balance of dilution risk vs. potential strategic partner rerate.” Basically, investors need to balance the risk of Rivian heavily diluting their ownership stake in a bid to stay afloat while awaiting good news to come to speed up growth.
Hardly a ringing endorsement, but he has an overweight rating on RIVN stock and a $13 per share price target. With Rivian Automotive currently trading at almost $12 per share, there is not too much upside left.
It should be noted, however, that Jonas’ price target is on the low side. Wall Street has a consensus price target of $19 a share, implying an additional 60% upside to come.
Partnerships Part of the Buy Thesis
Part of the analyst’s thesis for growth stems from partnerships Rivian can perhaps make with original equipment manufacturers to help them reduce their emissions through a vehicle’s electronic control unit.
Rivian overhauled its electrical architecture to enhance generative artificial intelligence for its forthcoming R2 vehicle lineup. It will consolidate the number of ECUs in the vehicle, which might not sound like much, but can save the automaker thousands of dollars on each vehicle.
ECUs are in every vehicle, electric or gas-powered. The more technology a vehicle has the more ECUs it needs. Rivian has developed its own ECUs and software and now has embedded gen AI capabilities into it. The EV maker plans to offer that technology to help other automakers reduce their costs.
Jonas writes, “Rivian can explore partnerships with legacy OEMs on their network architecture to reduce ECUs.”
The problem is, while that could produce a nice revenue stream for Rivian, it is unrelated to its primary business of making cars itself. It doesn’t seem to be the sort of advance that will move the needle much in terms of revenue or profits, particularly if Rivian is losing money on the EVs it makes.
The Apple of Rivian’s Eye
The other speculative note that sparked interest in Rivian stock was the possibility of a partnership with Apple (NASDAQ:AAPL). However, there is no indication of what Apple might seek in a partnership or who the partner actually is. It is just rumor and fluff not built on any foundation whatsoever.
It is not likely to be anything AI-connected as Apple just said it was partnering with ChatGPT owner OpenAI to put the technology into its iPhone. At best Apple might put its CarPlay into a vehicle. Hardly a gamechanger for Rivian, so investors should completely discount the possibility.
Rivian Automotive’s business is hurting. It reported worse-than-expected earnings last quarter and it continues to burn through cash at a high rate. Until Rivian can report positive news about actually selling more EVs, investors would do best just standing on the sidelines.
On the date of publication, Rich Duprey did not hold (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.