Rivian Automotive (NASDAQ:RIVN) stock has bounced back slightly in recent days but is more or less trading near all-time lows. Wall Street continues to give electric vehicle stocks the cold shoulder. Even as Rivian has been facing fewer issues than its competitors, most notably Lucid Group, remember that the market has soured even on profitable EV companies like Tesla.
Affordability and range anxiety have affected EV demand negatively. That’s bad news for Tesla. It’s especially bad news for EV startups like Rivian. Startups need to beat the market incumbent on price to succeed, which bodes poorly for RIVN in the near-term. You need to avoid this stock.
RIVN Stock and its Massive Post-Earnings Tumble
Although bearish sentiment for EV stocks since the start of the year placed RIVN back on a downward trajectory, it’s been the company’s latest earnings release that has had the greatest negative impact on shares.
On Feb. 21, Rivian released results for the fourth quarter (ending Dec. 31) and the full-year 2023. While the company reported strong revenue growth (167%) for the preceding year and met guidance, the company fell severely short in other, more important areas.
As InvestorPlace’s Thomas Niel discussed in his post-earnings write-up on RIVN stock, the company reported a higher-than-expected net loss ($1.58 versus $1.35 per share). Of perhaps greater concern, Rivian also issued 2024 production guidance of just 57,000 vehicles. This guidance both fell short of the sell-side’s forecasts and suggests far less impressive levels of revenue growth for the company this year.
With this, it’s no wonder that shares fell 25.6% the trading day after earnings, and by around 12% the day after that. Again, RIVN has bounced back, but I wouldn’t count on a continued rebound. A key resurgence catalyst for Rivian remains at least a year away. In the meantime, short-term headwinds will probably persist.
Expect More Dips Before Any Rips
Following Rivian’s horrendous earnings release, numerous analysts downgraded RIVN stock in response. Yet while both investors and analysts have reacted, I wouldn’t assume that the dust has settled. Shares could still pull back as weak growth and high operating losses continue.
While RIVN has hit new lows, the company sports a market cap of around $10.6 billion. Yes, compared to Rivian’s current cash position ($9.4 billion) alone, this valuation may look discounted, rather than out of hand.
However, keep in mind that Rivian will probably burn through a large chunk of this war-chest, as it ramps-up production, gears up for the launch of the R2 platform of vehicle models, including its R2 midsize SUV model for the mass market, and absorbs subsequent quarterly operating losses.
Worse yet, it’s not as if the R2 models (which also includes a lower-priced electric pickup model) are set to roll off the factory floor later this year. The vehicles won’t become available for consumers until 2026. With more losses ahead, and this fairly long timeline towards a growth resurgence, the market could de-rate RIVN to an even more discounted valuation.
Yet Another Stay Away Situation Among EV Stocks
Beyond the prospect of more dips until an R2-powered rip, keep in mind the R2 models may fail to be a blockbuster hit for Rivian. Even if at that point Rivian will be better-positioned to compete on price, competition from market incumbents could limit how the odds this platform launch makes the company profitable.
Rivian also may have to tap into outside capital once again between now and 2026. At least, based on CEO RJ Scaringe’s evasive responses to questions on the matter during a CNBC interview last month. The resultant dilution from additional capital raises would likely water down future returns.
Less troubled than its peers, yet still many challenges, consider RIVN stock another stay away situation among EV stocks right now.
RIVN stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
