Rivian Automotive (NASDAQ:RIVN) stock is in a better place than many other EV plays, but that doesn’t make it a buy. Rivian’s relative strengths notwithstanding, the company is far from being on a smooth ride to growth and profitability.
Although experiencing fewer issues, the Rivian’s troubles could soon start weighing on shares. This stock, after rising slightly during 2023 (by around 4%), could turn negative during 2024.
RIVN Stock: A Nose Ahead
At the start of this decade, several electric vehicle manufacturers went public. Each one has teased that, through key differentiators, they could grab a profitable share of this fast growing market from Tesla and the incumbent auto manufacturers.
But while these companies talked up a big game when they went public, over the past two years skepticism about their “Tesla killer” bonafides has increased. For instance, as I pointed out recently, Lucid has consistently disappointed investors, and now seems very unlikely to get back on track.
Fisker may not have necessarily angled to become the “next Tesla,” but based on the latest news, it appears to be in a very bad spot financially. In contrast, Rivian seems to be ahead. Last quarter, both production and deliveries more-than-doubled compared to the prior year’s quarter.
The company has also continued to make upward revisions to its production guidance. Yet while technically ahead of comparable names, it may be best to say that Rivian is merely a nose ahead, not enough to counter the EV maker’s own set of problems.
Big Losses Possible, Despite a Slight Lead
Issues plaguing LCID and FSR, like production hiccups and weak demand, may not be such big issues for RIVN stock. However, in one key area, Rivian has a lot in common with its fellow would-be Tesla killers: a lack of profitability, and a high level of cash burn.
As I’ve pointed out before, Rivian has been consistently unprofitable. During the first nine months of 2023, the company burned through around $3.63 billion in cash.
Sure, the company still has billions more in cash on hand. It has also financed the build-out of its Georgia EV manufacturing plants via the use of so-called “phantom bonds,” although these are a red flag. Further growth could also mean a narrowing of losses.
Still, all of this may not be enough to keep RIVN steady next year, much less send shares to higher prices. Even with its war-chest and alternative financing methods, another dilutive capital raise may not be out of the question.
Another capital raise could dilute RIVN’s share price. In short, this stock likely will tumble in 2024 after experiencing stability in 2023.
Stay Away from this ‘Best of the Worst’ Play
While it may sound harsh, “best of the worst” is the best way to describe Rivian right now. The vehicle electrification push hasn’t gone away, but the public’s appetite for EVs has calmed down, if only temporarily.
Slowing EV demand, coupled with rising production and build-out construction costs, points to the EV industry experiencing more pain before the situation. Rivian is no exception. Down the line, the situation could change.
Either the stock could fall to a price where current issues reach a point where they become overly priced into shares. Or demand/cost trends in the EV space improve, warranting a change in view. Still, until one or both things happen, there’s little reason to hold or enter a RIVN stock position.
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.
