After disappointing fourth-quarter results, Rivian (RIVN) stock earned a double downgrade, sending share prices to an all-time low. Sitting at its lowest value since going public, the EV maker looks to gain control of costs in 2024.
Q4 earnings miss the mark
After releasing Q4 and full-year earnings results Wednesday, Rivian announced it was laying off 10% of its salaried employees.
Rivian’s CEO RJ Scaringe explained on the company’s media call the move enables them “to maximize the amount of impact we can have as a company.” Scaringe said the company “is not immune to existing economic and geopolitical uncertainties.”
The impact of higher interest rates has rippled across the industry. Rivian’s order bank has “notably reduced” as the EV maker scales output.
Although deliveries more than doubled last year, with over 50,000 vehicles handed over, the pace slowed in Q4.
As CFO Claire McDonough explained in November, Rivian expected “a more significant gap between production and deliveries” with Amazon limiting new vehicle intake during the holidays.
Although Rivian’s net losses improved in the fourth quarter ($1.5B vs $1.7B) from 2022, the EV maker’s gross margins took a hit with lower vehicle deliveries.
| Q3 ’22 | Q4 ’22 | Q1 ’23 | Q2 ’23 | Q3 ’23 | Q4 ’23 | |
| Rivian loss per vehicle | $139,277 | $124,162 | $67,329 | $32,594 | $30,500 | $43,372 |
Rivian lost $43,372 for every vehicle it delivered in the fourth quarter. Despite improving the number all year, Rivian’s gross profit per vehicle fell from $30,648 in Q3, $32,595 in Q2, and $67,329 in Q1 2023.
Keep in mind, this is still a roughly $81,000 improvement from a year ago when Rivian was losing $124,162 for every EV handed over.
Rivian stock hits all-time low after downgrade
Rivian’s stock was already trending downward following the Q4 earnings miss, now it’s sitting at an all-time low at roughly $10 a share.
As the company announced in November, it will shut down consumer and commercial production lines for several weeks in Q2. The planned downtime is to introduce new cost savings and technology to the R1 platform.
Rivian expects the changes will “meaningfully reduce” material costs as it exits 2024. With the upgrades, Rivian believes it will achieve a “modest growth profit” in Q4 2024.
Although it’s only planned over a portion of Q2, the upgrades will “impact all four quarters of output,” as McDonough explained. As a result, Rivian expects deliveries to be 10% to 15% lower than in Q4, suggesting around 12K to 12.5K in Q1.
Rivian projects production will remain flat this year, with around 57,000 vehicles made at its Normal, Ill plant.
The EV maker’s future promises were not enough to win over analysts. Rivian stock earned a double-downgrade this week, with UBS and JP Morgan both cutting price targets.
Analyst Joseph Spak cut his price target from $24 to $8 per share. The target suggests over 23% downside from its current $10.40 price per share.
Although “we have been optimistic on RIVN’s product and brand ultimately winning out,” Spak said in a note to clients, “a rapidly changing EV backdrop causes us to reassess our demand view.”
Spak noted that Rivian’s path to profitability and cash flow could be harder to achieve. The analyst said UBS’ average annual delivery forecast for 2025 to 2027 is roughly 33% lower than before. Spak also raised concerns about achieving 2024 gross profit and EBITDA targets.
The analyst projects a big cash raise in 2025, potentially around 30% of its market cap. Meanwhile, Spak said strong demand for EVs could boost Rivian’s stock. Spak said improved cost reductions could squash the need for more capital.
JPMorgan also lowered its price target to $11, citing missed targets and disappointing new guidance.
Even Tesla’s CEO Elon Musk chimed in. Musk posted on X (Twitter), saying the “current trajectory has them bankrupt in ~6 quarters. Maybe that trajectory will change, but so far it hasn’t.”
Electrek’s Take
Although there are real concerns with Rivian’s financials and ability to generate a profit, the EV maker is executing a plan to get costs under control.
Rivian’s R1S was the best-selling EV in the US last year, priced over $70,000. The brand was the fifth best-selling EV maker in the US last year. Rivian has a good product and has already established itself as a true luxury EV maker. Now, the company needs to nail the next growth stage.
The company already has upgrades planned to cut costs with its R1 vehicles. On March 7, Rivian will introduce its more affordable R2 electric SUV, which will significantly expand its market.
Rivian will need to either cut costs further or introduce new revenue streams like services, as R2 production is not slated to begin until 2026.
McDonough said Rivian “remains confident” that cash and equivalents can fund operations through 2025.
Source: CNBC
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