Among electric vehicle makers, Rivian Automotive (NASDAQ:RIVN) is at the back of the pack. This will have important implications for RIVN stock holders.
The company and its stock are in a rapidly deteriorating situation with no clear signs of recovery evident. Since last fall, Rivian Automotive has announced poor financial results, mounting losses, missed delivery targets, job cuts, and a share dilution in an effort to raise cash. Each announcement from the company appears to be worse than the previous one. The result is that RIVN stock has fallen 46% in the first two months of the year. Since going public in November 2021, the share price has declined 91%.
Poor Earnings and Job Cuts
In late February, Rivian Automotive announced plans to cut 10% of its salaried workforce as its latest financial results and guidance fell far short of Wall Street expectations. The EV maker announced a fourth-quarter 2023 loss of $1.58 per share on revenue of $1.30 billion. Analysts’ consensus forecast had called for a loss of $1.35 and revenue of $1.32 billion. Rivian currently has 16,700 employees. It’s not clear how many salaried workers will be targeted in the upcoming round of layoffs.
The forward guidance wasn’t much better than the earnings. Rivian said that it expects 2024 production of 57,000 electric vehicles. Wall Street was looking for sales of 66,000 vehicles. Along with the sales guidance, Rivian said that it expects a financial loss in 2024 of $2.70 billion. News of the financial results and weak guidance sent RIVN stock down 18% in a single trading session. It’s a far cry from the company’s market debut in 2021 when it briefly had a market capitalization greater than Ford (NYSE:F).
Missed Deliveries and Big Losses
While the poor earnings and outlook sank RIVN stock in recent weeks, so too did news that the company’s fourth-quarter electric vehicle deliveries missed Wall Street’s targets. Rivian reported separately from its earnings that it sold 13,972 electric vehicles in the final three months of 2023, 10% less than in the third quarter of last year, and below analysts’ forecasts of 14,430. The company blamed the delivery miss on high-interest rates that have hurt consumer demand. RIVN stock fell 10% on news of the delivery miss.
At the same time that Rivian missed its delivery target, it acknowledged some eye-popping losses. Rivian’s electric pick-up trucks sell at an average price of $80,000, putting them out of reach for many consumers. The trucks are also expensive to produce. Rivian said that it has been selling its electric trucks at an average loss of $33,000 each. Consequently, the company has burned through about half of its $18 billion cash pile since last summer.
Management has said that they are focused on lowering costs and streamlining production. To raise more money, Rivian announced last October a new bond issuance. Specifically, the company issued $1.5 billion in convertible notes, which is debt that can be converted into stock. That move diluted the holdings of current shareholders and was yet another blow to investors who entrusted Rivian with their capital. Since the bond issue was announced, RIVN stock has fallen 52%.
Sell RIVN Stock
Anyone still holding onto Rivian stock needs to ask themselves why. Nothing good is happening at the company. The problems have put Rivian Automotive further behind its competitors. With the company producing electric trucks at a huge loss and burning through cash at an alarming rate, there are questions being raised about whether Rivian can remain a going concern. With so many other options available in the electric vehicle space, it doesn’t make sense to risk money on this automaker. RIVN stock is a sell.
On the date of publication, Joel Baglole did not have (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.
