It’s a brutal start to the trading year for electric vehicle (EV) stocks. For Rivian (NASDAQ:RIVN) investors this is certainly the case, as RIVN stock is sinking 6% in today’s session. Nearly across the board, most EV companies are seeing declines as investors price in the impact of Tesla’s (NASDAQ:TSLA) Q4 delivery numbers.
Tesla reported fourth-quarter deliveries of 405,278 units, and 1.31 million deliveries for 2022. While that represents 40% growth on a year-over-year basis, these numbers fell well short of analyst expectations, which ranged from 409,000 to 433,000 units. The consensus estimate was for 427,000 deliveries, meaning Tesla missed the mark by more than 5% for the quarter. This miss led to an analyst target price cut from JPMorgan’s Ryan Brinkman, from $150 per share to $125 per share for Tesla.
While a 5% miss may not seem like a reason for TSLA stock to be down 13% or for rival Rivian to decline by 7%, it’s a large enough miss to warrant concern over growth rates in this sector. Indeed, the EV space is one that many analysts have had overly-bullish estimates proven conservative in recent years. If growth rates slow, so too should the valuations of companies in this sector.
Let’s dive into what this all means for investors in Rivian and other EV stocks.
Is RIVN Stock in for Another Year of Pain?
It’s starting to become clearer to many investors that the market for high-end luxury EVs may not be as robust as it was at the onset of 2022. It’s a new year, and with these latest numbers from Tesla, it’s becoming clearer the supply and demand picture — at least at the high end of the EV market — isn’t as rosy in 2023 as it was heading into last year.
The macro environment remains difficult for many companies to traverse. Increased costs due to supply chain disruptions remain. Consumers (particularly in white-collar jobs) may be increasingly concerned about job security. And borrowing costs for many high-end items (such as luxury cars) remain elevated.
Accordingly, with a potential recession on the horizon, investors appear less-enticed to put their money to work in companies sensitive to what could be difficult times ahead. As a key Tesla rival in the production of high-end EVs, Rivian is a company with its own demand concerns. If Tesla is seeing less demand than anticipated, that’s certainly not great for Rivian’s outlook moving forward.
Right now, investors appear to be taking a cautious approach to such stocks. Personally, I think such an approach is warranted. Until we have more data on what the future holds, this is a sector that could prove to be a difficult one for investors in 2023.
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.
