Down 43% from its first trading day in November and 60% below its all-time high, the stock of electric vehicle maker Rivian (NASDAQ:RIVN) has become a basket case.
Rivian held a hype-filled initial public offering (IPO) on Nov. 10 and the company’s share price shot through the roof. At one point in the days that followed, the EV maker briefly had a market capitalization of $100 billion, greater than both General Motors (NYSE:GM) and Ford (NYSE:F).
However, a slew of negative news that has included downgraded production targets, canceled orders and executive resignations, has taken the shine of RIVN stock and brought it crashing back to Earth. At its current price below $64 a piece, Rivian shares continue to test new lows with no bottom in sight.
RIVN Stock Takes One Blow After Another
The latest body blow to RIVN stock was news that the company’s chief operating officer (COO), Rod Copes, has left the company after nearly two years in the senior executive role. The Rivian stock price immediately fell 3% on the negative news, extending its one-month decline to more than 43%.
In a written statement, Rivian said that Copes “began a phased retirement from Rivian several months ago, affording the team continuity as we moved toward production ramp.” His departure comes shortly after Rivian’s December announcement that it would fall “a few hundred vehicles short” of its goal to build 1,200 vehicles in 2022.
Rivian reported that it produced 1,015 vehicles in 2021, delivering 920 to customers who pre-ordered vehicles. The fact that it is in production mode is encouraging, however the downgrades to its goals for this year and the departure of the company’s COO have been extremely damaging to investor sentiment.
Equally harmful has been news that Amazon (NASDAQ:AMZN), a major early investor in Rivian, said it would buy some of its electric delivery vans from Rivian rival Stellantis (NYSE:STLA). Amazon had been seen as a key backer of Rivian and its move away from the company has been viewed as extremely negative. Much of the hype surrounding Rivian’s IPO came from the fact that Amazon had announced an order of 100,000 electric delivery vans from the EV maker.
Where to From Here?
Barely two months ago, Wall Street analysts who cover the electric vehicle sector had said that Rivian was one of the most likely contenders to challenge global leader Tesla (NASDAQ:TSLA). That narrative has quickly unraveled as Rivian has been hit with a slew of negative news.
Canceled orders, missed production targets and executive exits do not inspire confidence. This begs the question of where RIVN stock goes from here, especially now that it sits almost 17% below its IPO price of $78 a share? Wall Street price targets of $130 a share issued in December now seem out of touch with reality.
For its part, Rivian is striking a defiant tone in the face of all the company’s problems. Management — or what’s left of it — says it is proceeding to expand the annual production capacity at its manufacturing plant in Illinois to 200,000 vehicles a year from 150,000 currently, and still plans to have a second manufacturing plant up and running in Georgia in 2024.
The company also highlights that it currently has more than 70,000 reservations for its R1T fully electric pick-up truck. If there’s been one bright spot for Rivian lately, it is that its R1T truck has won critical praise, including being named MotorTrend’s “Truck of the Year.” So, Rivian is acting like it remains business as usual.
Avoid RIVN Stock
While RIVN stock may look tempting at its current share price, there are too many question marks surrounding the company.
The company needs to get its vehicle production back on track and find a permanent replacement for its COO. Until those things happen, the company’s stock is likely to continue its slide. Any more bad news and the share price could fall off a cliff.
For this reason, investors would be well advised to steer clear of Rivian for the time being. Given all the problems it is experiencing, and the fact that it only went public a few months ago, RIVN stock is not a buy.
On the date of publication, Joel Baglole held a long position in GM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.