Electric vehicle manufacturer Rivian Automotive (NASDAQ:RIVN) is definitely in the market’s penalty box now. Do you have enough risk tolerance, and enough belief in the company, to buy RIVN stock now? A deep dive into the data actually suggests that Rivian’s situation isn’t hopeless, so don’t bail on the company yet.
It’s well-documented that EV demand has fallen from its peak. Rivian Automotive isn’t the only EV maker struggling lately. Yet, it feels like the market is on a quest to punish Rivian even as the automaker takes action to bolster its bottom line. Ultimately, if you can handle the volatility, consider buying Rivian stock during its blood-in-the-streets moment.
Why RIVN Stock Collapsed Post-Earnings
In some ways, Rivian Automotive’s fourth-quarter 2023 earnings results weren’t too bad. Starting with the top-line results, Rivian’s revenue improved dramatically from $663 million in the year-earlier quarter to $1.3 billion in Q4 2023. This result beat Wall Street’s call for $1.28 billion.
Turning to the bottom line, Rivian Automotive improved its net earnings loss from $1.72 billion, or $1.87 per share, in Q4 2022 to $1.52 billion, or $1.58 per share, in 2023’s fourth quarter. The bad news is that analysts had expected Rivian to only lose $1.35 per share in Q4 2023.
What caused this earnings miss? CFRA analyst Garrett Nelson posits that it “was driven by higher-than-expected costs.” Nelson further suggested that Rivian Automotive will continue to face challenges, stating, “Unfortunately, there’s little Rivian can do to improve its near-term financial performance absent stronger demand.”
However, the earnings miss isn’t the only reason RIVN stock cratered 20% or more post-earnings. Apparently, the market wasn’t too impressed with Rivian’s full-year 2024 vehicle-production guidance. Analysts expected that Rivian Automotive would produce around 60,000 vehicles this year, but the company’s guidance calls for only 57,000 vehicles.
Rivian Automotive Strives for Cost-Efficiency
RBC Securities analyst Tom Narayan called Rivian Automotive’s recent earnings report “messy,” and I don’t disagree with that assessment. But again, it wasn’t all bad. Remember, Rivian delivered 13,972 vehicles in Q4 2023 versus just 8,054 in the year-earlier quarter. Rivian Automotive delivered 50,122 vehicles in 2023, more than double the 20,332 vehicles that Rivian delivered in 2022.
So, while Narayan might call the earnings report “messy,” I’d just call it “mixed.” Another example of glass-half-empty versus glass-half-full perspectives is Rivian Automotive’s announcement of a 10% salaried-workforce reduction. Probably, some stock traders will view this as a bad sign for Rivian.
However, glass-half-full perspective would view this as Rivian Automotive being proactive in reducing its expenses. Again, Nelson pointed out the “higher-than-expected costs” that created problems for Rivian. Hence, investors should be glad that the company is taking action to curb its costs.
Rivian Automotive’s founder and CEO, RJ Scaringe, made it crystal clear that the automaker is ready to do what it takes to keep costs down:
“We are aggressively focused on driving cost efficiency throughout the business, achieving positive margins and building our go-to-market function to support our long-term growth.”
Thus, if Rivian Automotive can continue to narrow its net earnings losses, investors should celebrate the company’s focus on cost efficiency instead of worrying about it.
RIVN Stock: Buy When the Market Is Fearful
The sudden drop in Rivian stock may be an overreaction, or even a wrong reaction, to the company’s earnings report and workforce reduction. Rivian Automotive’s results weren’t all negative, and the market really ought to appreciate the automaker’s proactive cost-reduction efforts.
Therefore, it would be hasty for investors to just give up on Rivian Automotive. If you’re not afraid of volatility and you’re on board with Scaringe’s cost-efficiency focus, give RIVN stock a try today.
On the date of publication, David Moadel 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.
