Rivian Automotive Inc.’s (NASDAQ: RIVN) shares inches down in pre trading session on Monday as the steady decline in the share price of Rivian Automotive Inc. reveals an ugly truth: investors have lost trust in the capacity of the Amazon.com Inc.-backed business to compete in a competitive electric-vehicle industry.
After a 93% stock wipeout, a market capitalization that exceeded $150 billion days after a blockbuster public trading debut in late 2021 now stands at less than $12 billion, reflecting almost no value beyond the company’s cash hoard.
Rivian, like other EV startups, lacks the benefits of large-scale manufacturing cost savings at a time when legacy auto manufacturers are actively pushing into the market and Tesla Inc.’s pricing cuts are pressing rivals to follow suit. And, as the Federal Reserve continues to tighten monetary policy, raising capital to fund that larger scale has become increasingly difficult.
“The market right now is not willing to assign any value to Rivian’s growth prospects,” said Ivana Delevska, chief investment officer at SPEAR Invest. With $11.6 billion in cash and equivalents and $1.6 billion in debt, the company “still needs to invest several billion dollars to prove out its business model,” she added.
Wall Street experts are beginning to abandon their positive positions. RBC Capital Markets analyst Tom Narayan downgraded his recommendation from outperform to sector perform last month, citing dwindling profit margin expectations. On April 14, Piper Sandler’s Alexander Potter was downgraded in a similar manner. According to Bloomberg statistics, Rivian still has 13 buy ratings, seven holds, and two sells.
According to Bloomberg statistics, revenue expectations for the first quarter have dropped by more than 25% since the end of December. Analysts now expect the business to announce sales of around $650 million on May 9, up from $95 million in the same time last year.
Overall, it’s a difficult time to sell pricey electric pickup trucks or sport utility vehicles like the ones Rivian makes, especially with rising interest rates making car loans less appealing. The R1T pickup truck now costs at $73,000, whereas Ford’s electrified version of the enormously successful F-150 model starts about $60,000.
Brian Mulberry, client portfolio manager at Zacks Investment Management, remarked that investors tend to appreciate that this is likely a niche brand for the time being, unless they can increase production and improve sales margins.
According to Potter of Piper Sandler, Rivian will need to raise more than $4 billion to support development beyond 2025.
“Rivian should not abandon its strategy, but we believe Rivian will continue to trade at book value until funding is addressed,” he added.
