Last week dealt a heavy blow to the electric vehicle (EV) sector, with Rivian Automotive (RIVN) and Lucid Group (LCID) tumbling following their Q4 earnings reports. While Lucid managed to stay afloat after hitting record lows in January, RIVN stock plummeted to its all-time lowest levels.
In late 2021, Rivian’s market cap soared above $150 billion, surpassing even automotive giants like Ford Motor Company (F) and General Motors (GM). This period coincided with the EV stock bubble at its peak, fueled by Tesla’s skyrocketing market cap, and the imminent rise of companies like Lucid.
Fast forward to 2024, where traditional automakers like Ford and GM rake in record profits from internal combustion engine (ICE) vehicles. Meanwhile, many EV startups, including Rivian, grapple with continuous losses. Even Tesla’s operating margins have dwindled significantly from their peak.
A Closer Look at the EV Market Woes
The recent Wall Street Journal headline, “EV Startups Struggled to Build Cars. Now They Struggle to Sell Them,” encapsulates the current woes of Rivian and other startup EV companies. What was once a supply-side constraint narrative due to disruptions from the pandemic has now shifted to concerns over dwindling demand.
2023 marked the tipping point, with companies like Polestar, Fisker, and Lucid slashing production targets amidst sluggish vehicle uptake. The worries over EV demand only intensified in 2024, especially after Tesla’s cautious note on lower anticipated deliveries. Last week, Rivian and Lucid’s 2024 production forecasts fell short of market expectations, further alarming investors.
Analysts Slash Forecasts for RIVN Stock
After Rivian and Nvidia released their earnings reports last week, the contrasting reactions from analysts were stark. While Nvidia’s impressive performance led to target price hikes, Rivian faced a different fate. UBS notably downgraded RIVN from “buy” to “sell,” slashing its target price from $24 to $8. Truist, although less severe, followed suit with a downgrade to “hold” and a reduced target price of $11.
Currently, only 60% of analysts covering RIVN advocate for a “buy” or better rating, down from 70% a month earlier.
The Long Road to Recovery for Rivian
Rivian saw a glimmer of hope at the start of the week with a slight uptick in its stock, but a sustained recovery seems distant. The EV industry’s volatility may persist for several quarters, necessitating macroeconomic stability, normalized interest rates, and price discipline for companies like RIVN and LCID to regain their luster.
Rivian initially made waves with its top-notch products and boasts a sturdy balance sheet relative to its EV counterparts. However, overcoming challenges in scaling up production, launching new models, and curbing losses poses a formidable task – a lesson gleaned from Tesla’s journey. Elon Musk’s advice to Rivian echoes this sentiment, emphasizing the need for stringent cost reductions and operational focus.
Rivian’s future hinges on adept management execution across various fronts, from enhancing production efficiency to achieving profitability targets by year-end 2024. While the road ahead is rough, with macro headwinds looming large, Rivian’s resilience remains a beacon of hope, at least for now.