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Rivian Stock Crumbles After Earnings: Buy Now?

Rivian stock succumbed to the company’s Q4 earnings miss. Here is what investors should consider before committing capital to this high-growth story in the EV space.

Rivian stock  (RIVN) - Get Rivian Automotive Inc. Report did not resist a disappointing earnings report, which the company released in the evening of March 10. Shares traded down 13% as of the writing of this paragraph. At the after-hours price, RIVN has dipped 80% from the all-time high reached in November 2021.

Today, Wall Street Memes reviews some of the highlights of Rivian’s earnings report. We then ask: does it make sense to own this stock at the current price?

Figure 1: Rivian Stock Crumbles After Earnings: Buy Now?

Figure 1: Rivian Stock Crumbles After Earnings: Buy Now?

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Rivian’s earnings summary

Rivian went public only four months ago, but it is already zero for two. It has missed revenue and earnings expectations in Q3 and now, once again, in Q4.

To be fair, little do earnings matter for a company that has barely started to make product deliveries. In any case, GAAP loss per share of $4.83 was about twice as wide as expected.

Perhaps not even revenues booked are as important to the investment thesis: $54 million missed consensus by almost $7 million in Q4. Nearly 2,500 vehicles had been produced through March 8, with over 1,400 having cleared the production line in 2022.

The bearish reaction to Rivian’s earnings report probably came on the back of 2022 projections. The company guided for 25,000 vehicles made and EBITDA loss of $4.75 billion.

While the first number above is probably in line with previous estimates — the company suggested it in the earnings release: “our demonstrated production rate is in line with our expectations” — investors did not seem to be very impressed.

What probably did not help at all were the supply chain constraints experienced in Q1. Rivian blamed it, COVID-19, bad winter weather and a ten-day plant shutdown in Illinois to justify production challenges.

The tone of the automaker’s earnings report, however, remained highly optimistic. Management seems excited about production ramp ups and the order backlog through 2022 and beyond.

Rivian: growing pains

Rivian went public at a market cap of $100 billion-plus. Fun fact, the company did not have a single dollar in revenues to back up the valuation levels at that point.

This is not to say that Rivian is not a good company, or that its future is not bright. Instead, it suggests that the automaker stepped up to the limelight very early in its life — to put it mildly.

Therefore, I think that investors should not be surprised to see Rivian hiccup as it learns on the fly. The company is growing quickly from not much more than some installed capacity and a list of vehicle pre-orders.

For this reason, I believe that earnings misses and production delays should be accepted as par for the course, for now.

The question that investors should ask is whether they have the risk appetite and patience to play the long game. By most measures, I find it hard to justify Rivian’s current $38 billion market cap with past P&L results or projections through the next couple years.

Personally, I choose to stay away from RIVN. The investment is speculative, in my view, and I have a hard time making well-informed decisions based on the company’s little track record. Other investors may have a very different opinion.

To those, I suggest high tolerance for eventual losses and volatility, and wish luck in their investments.

Twitter speaks

Rivian delivered an all-around miss in Q4 and disclosed production challenges in Q1. Now trading around 80% below the November highs, is now the time to buy RIVN?

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)