Rivian Automotive (NASDAQ:RIVN), the high-profile electric vehicle startup, has been a company I’ve watched with great interest since its blockbuster IPO in 2021. As one of the most well-funded EV startups, Rivian’s journey has been closely followed by investors hoping that Rivian stock could emerge as a viable challenger to Tesla’s (NASDAQ:TSLA) EV dominance.

However, after digging into the company’s latest Q2 2024 earnings report, I believe Rivian’s path to profitability and long-term success remains highly uncertain.

Rivian’s Cash Burn Remains Alarming

In Q2, Rivian reported revenue of $1.16 billion, a modest 3.3% increase from a year ago. While top-line growth is always welcome, it was overshadowed by the company’s staggering net loss of $1.46 billion in the quarter. Let that sink in – Rivian’s net loss exceeded its total revenue!

On a per-vehicle basis, the numbers are even more concerning. Rivian is losing over $30,000 on every vehicle it sells, a sharp contrast to Tesla, which earns a hefty profit on each car. With Rivian’s cash and equivalents falling to $7.9 billion, the current burn rate gives the company a runway of only about two more years.

Rivian’s management has spoken about its drive towards profitability, with a goal of reaching positive gross margins by the fourth quarter of this year. However, with an operating margin of -105.9% over the trailing 12 months, Rivian has a long way to go.

Even with potential interest rate cuts providing a tailwind, I struggle to see how Rivian can flip the switch to profitability anytime soon without massively sacrificing growth or further diluting shareholders.

Partnerships Provide Some Hope, But Headwinds Remain

To its credit, Rivian has made some savvy strategic moves to improve its long-term prospects. A recently announced partnership with Volkswagen (OTCMKTS:VWAGY), which includes a $5 billion investment, should help Rivian reduce costs and accelerate the development of its next-gen vehicles. The ongoing commercial van deal with Amazon (NASDAQ:AMZN) also provides some revenue stability.

However, these partnerships don’t change Rivian’s harsh competitive reality. Tesla remains the 800-pound gorilla in the EV space, commanding the lion’s share of the market. Other established automakers like General Motors (NYSE:GM) and Ford (NYSE:F) are also heavily investing in EVs. Rivian will need to fight tooth and nail for every point of market share.

Significant macroeconomic and political risks are also on the horizon. With the potential of a Trump presidency starting in 2025, Rivian could face major headwinds if EV subsidies and incentives are rolled back. And while the Fed is expected to cut interest rates, it likely won’t be enough to drastically alter the demand for Rivian’s high-priced vehicles.

Analyst Opinions and Price Targets

Analysts have mixed views on Rivian’s prospects. Needham recently cut its price target for RIVN to $18 from $20 while maintaining a “buy” rating. The firm cites high owner satisfaction with the R1 model and the partnership with Amazon for electric van deliveries as key demand drivers. However, Needham also acknowledges uncertainty in near-term demand for the R1 and the need to adjust consensus delivery estimates downward.

Other analysts are more cautious. Cantor Fitzgerald notes that Rivian reported a less-than-expected gross margin loss in Q2, but the company still has a long way to go to reach profitability. InvestingPro tips highlight that while Rivian has more cash than debt, the company is quickly burning through its reserves.

The Bottom Line: Steer Clear of Rivian Stock For Now

Despite the hype and potential, I believe investors should avoid Rivian stock in the current environment. The company’s cash burn and lack of profitability are too concerning, especially with a looming recession. In a major market sell-off, high-risk speculative stocks like RIVN are often the first to be punished.

In the long term, I’m still cautious about Rivian’s prospects. While partnerships with Volkswagen and Amazon provide some optimism, Rivian faces immense competitive threats from Tesla and other established automakers pivoting hard into EVs. Rivian will likely require additional dilutive capital raises to stay afloat, which could put further pressure on the stock.

For these reasons, I’m reiterating my “strong sell” rating on Rivian stock.

On the date of publication, Omor Ibne Ehsan did not hold (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.

On the date of publication, the responsible editor held a LONG position in AMZN.