Rivian Automotive (NASDAQ:RIVN) is the next electric vehicle manufacturer to report quarterly results. While not for certain that Rivian stock surges once the latest numbers hit the street, a post-earnings rally isn’t out of the question.
Peer Lucid Group (NASDAQ:LCID) may have tanked after its latest quarterly earnings release, but Rivian’s deliveries beat could in hindsight prove to the prelude to improved results and upbeat corporate updates and guidance.
Yet while a positive reaction to this upcoming event could on the surface seem like a bullish sign for RIVN, I wouldn’t read too much into it. If a rally takes shape, it may not last for long.
Barring the reporting of game-changing news about the stock’s “far down the road” key catalyst, two key issues stand to knock shares even lower from here.
Rivian Stock: Earnings and Potential Surprises
Rivian Automotive is scheduled to report its results for the quarter ending March 31, 2024 post-market today. According to Seeking Alpha, most sell-side analysts have walked back their forecasts since Rivian’s last quarterly earnings release.
This could set the stage for some positive surprises with the EV maker’s latest results. Given the company’s greater-than-expected Q1 delivery numbers, plus Rivian’s recent efforts to reduce operating costs, may result in both a revenue beat, as well as lower-than-expected net losses.
Alongside “better than feared” results, the company could also positively surprise the market with its updates to outlook. Upping its 2024 deliveries forecast, announced further cost reduction efforts, or even updates on the company’s planned lower-priced R2 SUV and R3 crossover models would likely be well-received by the market.
That’s not all. Short interest in Rivian stock remains very high. Currently, around 18.6% of RIVN’s outstanding float is sold short.
A little positive news may drive a small squeeze, but several positive announcements would likely cause a massive move to the upside. Again though, while RIVN may soar after earnings, said rally could prove fleeting.
At Risk of Dropping Below Double-Digits
Rivian stock sank to single-digit prices last month, but a run-up in EV stocks following Tesla’s (NASDAQ:TSLA) well-received earnings release, plus some news regarding Rivian’s production capacity ramp-up, have pushed RIVN back to prices above $10 per share.
Post-earnings, a move back to between $12 and $15 per share in the immediate-term could be well within the realm of possibility. However, from there, don’t count on a move back to $20 per share and beyond. Instead, a return to sub-$10 per share prices may be more likely.
It all has to do with both Rivian’s continued high cash burn, plus the R2 and R3 models aren’t expected to debut until at least 2026. This means Rivian is likely to keep burning through billions between now and its next major scaling up moment.
As Reorg Research’s Jeremy Sherby argued in April, the company could a little over a year from now face a liquidity shortfall. The company will solve any potential liquidity issue through dilutive capital raising via the sale of newly issued RIVN shares. This will undoubtedly place another round of major pressure on the stock price.
Bottom Line: Stay Away After Earnings
As I hinted above, there is something that could make me more optimistic about RIVN after this week’s earnings release. That would be indication that the could launch its R2 and R3 models ahead of schedule, or at least announce intentions to do so.
Tesla made such a move in its recent earnings release. On the earnings conference call, CEO Elon Musk hinted that a lower-priced Tesla model could arrive as soon as 2025.
Barring a pulled-forward timeline for Rivian’s own lower-priced platform, however, I’ll stick with my bearish long-term thesis on RIVN.
That is, Rivian may experience temporary spikes on occasion, but long-term the stock will trend lower. Cash burn and dilution resulting from efforts to absorb these losses will water down RIVN’s per-share value.
With this in mind, view any post-earnings rally for Rivian stock as an opportunity to sell, not a signal to buy.
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.
