By Esha Dey | Bloomberg
Irvine-based Rivian Automotive lost its claim to be Tesla’s most credible competitor long ago. Now, its ability to navigate an EV demand slowdown poses its biggest test.
With even auto industry stalwarts such as Ford Motor Co. dialing back their expansion plans, the top question for investors will be how an unprofitable, cash-burning startup can weather the storm. Markets will be seeking clarity when the Amazon.com Inc.-backed firm reports fourth-quarter results on Wednesday.
“At some point, they will need to show that they can produce cars at scale and people will buy them,” David Mazza, chief strategy officer at Roundhill Investments, said in an interview. “If they cannot do that this quarter, then the stock will remain under pressure.”
Shares of Rivian fell as much as 5.2% in intraday trading Tuesday, pushing its year-to-date slump to more than 30% even as the tech-heavy Nasdaq 100 and the broader S&P 500 Index have both jumped by around 4%. Wall Street’s plunging expectations for the company’s 2024 revenue suggest the slide may not stop any time soon.
Analysts’ average estimate for Rivian’s revenue for this year has fallen 43% over a 12-month period, data compiled by Bloomberg show. The average price target for the stock has dropped more than 35% over the same time.
The trouble is that Rivian, as well as other smaller EV-makers such as Lucid Group Inc., face broader industry weakness at a time when they are least equipped to handle it. These companies need to scale up production to start making profits, which in turn requires spending cash. But with even Tesla cutting vehicle prices to shore up sales, there are going to be few takers for expensive cars made by Rivian and Lucid.
“It appears that even great product and tech is not enough to avoid the EV winter,” said Barclays analyst Dan Levy last week, as he downgraded his recommendation on Rivian. “With demand now in question, it likely implies pressure to…
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