Rivian Stock’s Make-or-Break Moment: New SUVs to the Rescue?

Stock Market

Rivian Automotive (NASDAQ:RIVN) stock has certainly been on quite the slip in recent months. On a year-to-date basis, RIVN stock is down more than 50%, as sector-wide issues continue to hamper most names in this space.

That said, Rivian also has its own fair share of hurdles to overcome. Higher interest rates and record-high EV inventories are only one piece of the equation.

Rivian has seen its own demand hit hard by a lack of premium EV buyers, leading the company to revitalize its product offering. While I think that can be a good thing, it’s clear the market remains uneasy on the stock.

Here’s what investors should consider when thinking about whether to give RIVN stock another shot at a spot in the portfolio right now.

The Plant Shutdown and RIVN Stock

Rivian ceased production at its Normal, Illinois plant to enhance efficiency and reduce costs for its R1S and R1T models. CEO RJ Scaringe announced the shutdown to implement cost-saving measures and upgrade technology.

Rivian implemented changes to decrease labor and production costs per vehicle, expecting flat production in 2024 because of the downtime. The company aims to reduce material costs further, having already significantly cut expenses per vehicle in Q4 2023.

In the first quarter of 2024, Rivian produced 13,980 vehicles and delivered 13,588, slightly lower than Q4 but better than anticipated. When the Normal plant reopens, it will operate two shifts instead of three, but all assembly line workers will remain.

Tim Fallon, the executive VP of manufacturing, highlighted efficiency improvements and undisclosed vehicle upgrades during an open house event at the facility.

Deliveries Beat Expectations

Rivian Automotive surpassed Q1 delivery estimates, delivering 13,588 vehicles, driven by high demand for its EVs. Despite this announcement, its shares fell 5% due to concerns over Tesla’s (NASDAQ:TSLA) weak numbers affecting the EV market outlook.

Analysts wondered about Rivian’s future growth prospects, citing its ongoing lack of profitability. 

Because of downturns in the EV market and economic turbulence, consumers now are thinking twice about buying EVs. Rivian announced its yearly production target and halted upgrades. 

While first-quarter production missed estimates because of supplier transitions, Rivian expects additional vehicle production in April. The company introduced smaller, cost-effective R2 SUVs and R3 crossovers, aiming for over $2 billion in production savings.

Upgrades Here and There

Rivian Automotive Inc. saw an upgrade and a 40% increase in price target from Piper Sandler analysts, boosting the stock on Friday. Analysts Alexander Potter and Ben Johnson upgraded the rating to “overweight” and raised the price target to $21 from $15.

This followed the introduction of three new models, with the R2 SUV receiving 68,000 orders in under 24 hours, indicating strong market interest.

The analysts also highlighted Rivian’s strategy to defer capital expenditures and manufacture the R2 in an existing facility as advantageous.

However, they cautioned that investing in RIVN carries risks, particularly if midyear re-tooling efforts are mishandled. Despite recent challenges, positive developments suggest a more optimistic outlook for investors.

D-Day for RIVN Stock

Rivian recently confirmed its Q1 earnings release for May 7. Experts expect a quarterly revenue decrease of 13% and that Rivian will not see any profits yet. GAAP EPS is also projected to be $1.28 compared to 2023’s $1.45. 

It’s my view that investors need to have a longer time horizon when it comes to this EV stock. For those looking to invest for a few quarters or even a couple years, that may simply not be long enough for investors to fully realize this company’s growth trajectory. In my view, Rivian ought to be a five-to-10 year investment, at least.

The company continues to grow, and its recent model lineup additions are bullish for its prospects. EV buyers want options, and Rivian provides these in spades, alongside excellent quality tech.

We’ll have to see how this earnings print comes in, and whether a better buying opportunity may be just around the corner.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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