As you may recall from my past coverage of Rivian Automotive (NASDAQ:RIVN), I’ve been bearish about this early-stage electric vehicle stock. However, following the EV maker’s latest quarterly earnings release, my RIVN stock analysis has become even more downbeat.
Why? Admittedly, Rivian remains in a much better position than other high-profile EV upstarts. For instance, Lucid Group (NASDAQ:LCID) and Mullen Automotive (NASDAQ:MULN).
Still, the latest results, and in particular, the latest updates to guidance, suggest that more pain and lower prices lie ahead for shares, even as RIVN shares have already experienced an immediate post-earnings price decline of nearly 15%.
That’s not to say Rivian is en route to crash into the stock market junkyard alongside LCID and MULN, but as I’ll explain below, given its increasingly unfavorable risk/return proposition, junking it from your portfolio is the best course of action.
The Recent Rivian Rout: No Surprise, Given Lackluster Earnings and Guidance
RIVN’s double-digit dip post-earnings is not a market overreaction. If anything, it could prove to be an under-reaction. For one, the results themselves were lackluster.
Although Wall Street knew pretty well where Rivian’s top line was going to fall (because of last month’s release of Rivian’s Q4 vehicle delivery numbers), their RIVN stock analysis called for the company to report net losses lower than that of that unveiled in the Feb. 21 earnings release ($1.35 versus $1.58 per share).
As hinted above, guidance was lackluster as well. In the earnings release, Rivian’s management noted that it expects 2024 production levels to be on par with 2023 production levels (57,000 vehicles). This came in below the Street’s forecast (66,000 vehicles), and underscores how 2024 will likely not be a year of growth re-acceleration.
Rivian also guided for the company’s losses (on an adjusted EBITDA basis) to come in at $2.7 billion. While representing a narrowing of losses compared to 2022 and 2023, this bit of guidance indicates a long road remains until this EV maker, once heralded as a possible disruptor of Tesla’s (NASDAQ:TSLA) EV industry dominance, becomes profitable.
At Best, Holding Steady; At Worst, More Declines Ahead
Late last year, there was a short-lived rebound in popularity for Rivian. While not certain, the prospect of lower interest rates possibly played a role in this. Low rates would undoubtedly be a boon for EV growth demand, as well as for the valuation of EV stocks.
However, with the Federal Reserve seemingly sticking to a “higher for longer” stance on interest rates for now, confidence in a resurgence in EV adoption/demand growth this year continues to dim. The Rivian production guidance further indicates that the company’s sales growth will come in a much slower pace compared to levels of growth reported in 2022 and 2023.
In near-term the RIVN stock analysis points to one of two scenarios playing out. Best-case scenario, the market cuts Rivian some slack for a continually soft EV market, and shares hold steady in anticipation of better times starting in late 2025.
That’s when the company is expected to commence production of its R2 line of lower priced electric SUVs. Worst-case scenario, investors decide waiting nearly two years out for Rivian’s growth/profitability to improve is far too long a timeline, leading to a continued de-rating.
RIVN Stock Analysis: Post-Plunge, it’s Still Not Too Late to Sell
To reiterate one of my points made above, I don’t expect RIVN shares experiencing a LCID or MULN-style capitulation. The prospect of little-to-no growth is much better than the prospect of declining sales (in the case of Lucid) and weak commercialization progress (in the case of Mullen).
Not only that, Rivian is at considerably less risk of entering the dilution spirals that have pushed Lucid and Mullen to new lows. With around $10.5 billion in liquidity, Rivian likely has enough cash on hand to sustain itself between now and the R2 launch, without having to tap into the capital markets again.
Still, with upside limited, and a strong chance investors de-rate Rivian, either because of a longer-than-expected profitability timeline, or the prospect of Rivian ending up a niche brand rather than market leader, my latest RIVN stock analysis shows that it’s not too late to sell.
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.
