What’s Wrong with Rivian Stock, and Will RIVN Recover and Go Back Up?

Last week was a bad one for the startup electric vehicle (EV) ecosystem, as both Rivian Automotive (RIVN) and Lucid Group (LCID) plunged following their respective Q4 earnings reports. RIVN stock fell to all-time lows, even as Lucid shares managed to hold above the record lows that they hit in January.

At its peak in late 2021, which came shortly after its mega IPO, Rivian commanded a market cap above $150 billion - which, for context, was even higher than Ford Motor Company (F) and General Motors (GM).

Rivian’s IPO came at a time when the bubble in EV stocks was at its zenith in Q4 2021. At the time, Tesla’s (TSLA) market cap was surpassing $1.2 trillion, while Lucid's was about to hit $100 billion. Many experts had all but written obituaries for gasoline-powered cars - and, by extension, the companies that were producing them.

Cut to 2024, and legacy automakers like Ford and General Motors are posting record profits selling internal combustion engine (ICE) cars, while startup EV companies are saddled with continued losses. Even Tesla’s operating margins are less than half of what they were at the peak. 

Here’s a closer look at what went wrong with EV stocks in general, and RIVN stock in particular - and whether RIVN can ever recover and go back up.

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What’s Wrong with Rivian and Other Startup EV Companies?

A recent Wall Street Journal headline, “EV Startups Struggled to Build Cars. Now They Struggle to Sell Them,” perhaps best captures what’s wrong with Rivian and other startup EV companies right now.

Until 2022, nearly all of the startup EV companies maintained that their sales were constrained by the supply side, largely due to disruptions caused by the COVID-19 pandemic. However, the “demand” question cropped up in 2023, as companies like Polestar (PSNY), Fisker (FSR), and Lucid Group all cut their respective production targets, citing slow offtake of their cars.

Concerns over EV demand have been at the forefront in 2024, too - beginning with Tesla's cautionary note that 2024 deliveries “may be notably lower than the growth rate achieved in 2023." Last week, both Rivian and Lucid provided their own 2024 guidance, which further spooked investors. 

Rivian expects to produce 57,000 vehicles in 2024, which is slightly below 2023 levels. While Lucid's 2024 production guidance of 9,000 vehicles was ahead of the 8,428 vehicles it produced last year, both companies’ guidance was significantly below the Street's estimates.

Apart from slowing demand, Rivian is still battling continued cash burn, which is fast depleting its once-humongous cash pile. The company has resorted to belt-tightening, and announced a 10% reduction in its salaried workforce during the Q4 earnings call.

RIVN Stock Forecast: Analysts Cut Target Prices

Both Rivian and semiconductor designer Nvidia (NVDA) released their earnings last Wednesday after the closing bell rang. While analysts went overboard raising Nvidia’s target price – with the new Street-high target price implying a market cap of $3.5 trillion – even the bulls were left disheartened after Rivian’s earnings.

UBS, for instance, double-downgraded RIVN stock from “buy” to “sell,” while cutting its target price from $24 to $8. Truist was a bit less brutal, and downgraded the stock from “buy” to “hold,” while lowering the target price to $11 from $26. 

Currently, only 60% of analysts covering RIVN rate the stock as a “buy” or better, while the corresponding figure one month ago was 70%.

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Will Rivian Stock Ever Recover and Go Back Up?

We did see some upward momentum in Rivian stock to start this week on Monday, but a sustainable recovery might not come anytime soon. The EV industry’s turmoil might persist through the next several quarters, and we’ll need a stabilization of the macro environment - and especially the normalization of interest rates, as well as some sort of price discipline - before EV stocks like RIVN and LCID start to shine again. 

Overall, I believe that while Rivian made its initial mark with quality products, and still has among the most formidable balance sheets among its startup EV peers, the company needs to grow at scale - which, as we already know from Tesla’s experience, is the toughest part.

Tesla CEO Elon Musk, by the way, has some advice for his rivals at Rivian. The outspoken exec tweeted, “They need to cut costs massively and the exec team needs to live in the factory or they will die,” alluding to something he reportedly did at Tesla in the past when it was ramping up production of its Model 3.

The ball is now in the court of Rivian's management, and the company needs to deliver on multiple fronts. That includes scaling production, launching new models, and cutting down on perennial losses - starting with churning out a gross profit, which it predicts by the end of 2024. These benchmarks won't be easy to acheive, especially amid the unsupportive macro environment, but I am not giving up on Rivian – at least, not for now.

On the date of publication, Mohit Oberoi had a position in: RIVN , LCID , TSLA , F , GM , NVDA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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