Rivian stock has flagged an inverted H&S pattern: will the rally continue?

Rivian stock is doing well this month and beating its top rivals like Lucid and Tesla, helped by its strong vehicle delivery numbers. RIVN soared to $20.15 on Monday, its highest level since January 8. This rally may continue ahead of its earnings, which are coming out on July 30th. 

Rivian stock may have more upside ahead of earnings

The daily chart suggests that Rivian shares may have some more upside to go in the near term. It has already formed a golden cross pattern as the 50-day and 200-day moving averages crossed each other. Since then, the stock has remained above these two averages.

Most notably, the stock has formed an inverted head-and-shoulders pattern. It has already moved above the neckline at $18.17, confirming the bullish outlook. At the same time, the Relative Strength Index (RSI) has continued rising in the near term.

Therefore, the stock will likely continue rising in the near term as investors embrace the Fear of Missing Out (FOMO). If this works, the next important target to watch will be at $22.72. 

This surge will not be linear. Instead, the stock may retreat and retest the support of $18.17. Such a move is known as a break-and-retest and is a common bullish continuation sign.

RIVN stock chart | Source: TradingView

Rivian’s vehicle demand is rising

The ongoing Rivian stock surge is happening at a time when demand for the vehicles is rising. In a recent statement, the company said that its deliveries rose to 12,194 in the second quarter. 

It produced 12,613 vehicles, a trend that may continue once it completes building its plant in Georgia. Its existing plant can make 200k vehicles a year, while its upcoming one in Georgia will make 400k vehicles.

Rivian is benefiting from the rising demand for electric vehicles after gasoline prices jumped during the US-Iran conflict. Also, it is benefiting from the recently R2 vehicle, whose production has started to pile up. The company also aims to launch a cheaper R3 crossover and R3x vehicles to give customers access to a high-performance, lower-cost vehicle. 

Most importantly, after years of selling its vehicles domestically, the company is seeking to grow its business in Europe, with estimates being that it will start doing so next year. This will not be an easy thing as Europe is already saturated with domestic vehicle manufacturers and those from China.

As a result, analysts believe that its growth will gain momentum in the coming years. The annual revenue is expected to jump by 30% this year to $7 billion, followed by a 65% jump next year to $11.6 billion. If this trend continues, it may get to $20 billion in annual revenue in the coming years.

The risk, however, is that the company continues to lose money in the coming years. In a recent statement, the management noted that it will not achieve an EBITDA profit next year. 

As such, with the cash burn continuing, the company may dilute its shareholders soon. It has a long history of diluting its shareholders, with its total outstanding shares rising to 1.26 billion from 892 million in 2022.

Also, the stock is nearing the targets set by analysts. Needham has a target of $23, while Cowen, BNP Paribas, and Benchmark are targeting $20, $22, and $25.

READ MORE: Rivian stock forecast: Wyckoff theory points to long‑term rebound