Down by 92% since its initial public offering (IPO) in November 2021, Rivian Automotive (NASDAQ: RIVN) highlights the risks of buying a stock too early. The electric vehicle (EV) maker failed to live up to its hype as relentless cash burn and competition eroded its business.
Can management turn the situation around? Let’s explore what the next three years could have in store.
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When it hit public markets in 2021, Rivian was the second most valuable U.S. automaker in the world, behind Tesla. With a market cap of over $100 billion, it dwarfed rivals like Ford Motor Company and General Motors despite reporting barely any revenue. Clearly, the hype had overcome fundamentals. But even though Rivian’s shares have fallen back to Earth (current market cap: $10.5 billion), the stock still isn’t necessarily a good value.
Third-quarter earnings were grim. Revenue fell 35% year over year to $874 million, which is a bad sign for a growth-oriented company that will need to scale its business model into profitability. Furthermore, the company generated a gross loss of $392 million, which means it costs more to make and deliver its cars than it can recoup from selling them.
CEO RJ Scaringe aims to turn the situation around relatively quickly. He expects Rivian to generate a gross profit in Q4 through higher average selling prices, better manufacturing efficiency, and lower materials costs. If successful, this could mark an inflection point for the company, opening a path to net income through scale and cost-cutting.
While Rivian’s 2024 delivery outlook of 50,500 to 52,000 vehicles (compared to 50,122 in 2023) remains unimpressive, new cheaper models like the mid-sized R2 and R3 SUVs (starting at $45,000) could boost growth by making the company’s lineup more affordable when they are expected to launch in the first half of 2026.
Unlike Tesla, which is up by around 40% since Trump’s election win on Nov. 5, Rivian’s shares initially reacted poorly to the news, dropping by around 7% before recovering a week later. There are several reasons investors might be spooked about the new administration.
During the campaign trail, Trump expressed skepticism about what he called “electric vehicle mandates,” which are policies designed to force a transition to EVs by limiting tailpipe pollution and tightening fuel economy standards. The regulations generally make gas-powered cars more expensive for consumers and costlier for automakers to produce, accelerating the adoption of greener technologies.
