Among the early stage electric vehicle stocks, Rivian Automotive (NASDAQ:RIVN) has far fewer problems with its underlying business. However, whether that makes RIVN stock a great opportunity today is another question.

Yes, the company has made far more progress than undercapitalized upstarts like Mullen Automotive (NASDAQ:MULN). Preorder numbers for Rivian have also been more promising compared to Lucid Group (NASDAQ:LCID), another high-profile EV maker that’s been touted as a possible Tesla (NASDAQ:TSLA) in the making.

Yet despite being perhaps in a stronger position than its peers, this doesn’t mean that RIVN shares are on their way toward substantially higher prices. Whether on a short, medium, or long time horizon, shares could produce disappointing returns from here.

Why? Chalk it up to a valuation that already reflects potential growth and rising competition that may hinder Rivian’s ability to realize this potential.

RIVN Stock Is ‘Priced for Perfection’

Given that Rivian stock trades for around a quarter of its 2021 IPO price ($78 per share), at first it may sound odd to say that shares are at present “priced for perfection.”

However, just because RIVN stock has experienced a significant price decline since its debut doesn’t mean that it became a bargain in the process. RIVN simply went from being extremely overvalued, to trading at a valuation that prices in future forecasts as near-certainties. Granted, this doesn’t necessarily mean the stock today has zero additional runway.

Sure, it is possible for Rivian, after last year’s setbacks, to beat expectations this year. That said, is it likely to happen? In my view, no. This is mostly due to increasing competitive challenges.

Investors bullish on Rivian will argue that this EV maker’s focus on the truck and van market leaves it less vulnerable to competitive risks than the EV upstarts attempting to compete directly with Tesla. However, Ford (NYSE:F), which has sold nearly all of its past RIVN investment, may pose a serious competitive threat, with its best-selling F-150 Lightning truck.

Even Falling Slightly Short of Expectations Could Drive Big Declines

Don’t get me wrong. It’s not as if the F-150 Lightning alone will fully destroy Rivian’s ability to continue growing. That said, this emerging competition will threaten Rivian’s potential to exceed expectations.

It may also result in the company reporting results that fall slightly short of expectations. The stock’s current valuation leaves little room for error. “Slight misses” could still have a serious impact on the performance of RIVN stock.

If factors such as competition affect growth over the next few years, net losses could end up being far greater than current forecasts. Having to delay its profitability timeline once again will of course put more pressure on the stock, but that’s not the only risk.

Although management has previously stated the company has enough cash to fund operations until 2025, if it fails to become profitable by that time, it will likely need to raise more cash by selling new shares, which will be dilutive to existing investors.

My Verdict on RIVN

There’s a lot more that could sink Rivian lower, rather than send it back to substantially higher price levels. The risk/reward proposition does not appear favorable.

In fact, from a risk/reward standpoint, Ford may be a stronger EV wager. The “old school” automaker has a strong chance of successfully transitioning into being primarily a maker of electric vehicles.

As this may result in increased operating margins, the market could in turn rerate Ford’s shares (currently trading for around 8.5 times forward earnings) to a higher valuation.

Multiple expansion, coupled with increased earnings, could put F stock in the fast lane in the coming years.

In contrast, despite moving higher recently, RIVN stock could sputter going forward. With this in mind, it’s definitely not a buy right now.

On the date of publication, Thomas Niel 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.