Like other electric vehicle stocks, Rivian Automotive (NASDAQ:RIVN) has been pulling back over the past month. The electric van and truck maker’s latest quarterly earnings release has done little to drive a positive sentiment shift for Rivian stock. That’s not surprising.
As seen from Rivian’s results and guidance, the auto sector’s current slump is likely to continue impacting this early-stage EV company’s growth and margins in the quarters ahead.
Couple these mixed prospects with what remains an aggressive valuation for RIVN, and it’s clear that further near-term downside risk remains. That’s not to say that Rivian is at risk of severe capitulation, as has happened with other EV upstarts like Lucid Group (LCID).
However, given the stronger chance that shares sink further than unexpectedly bounce back in the immediate future, there’s little urgency to enter a position right now.
That said, we’ll concede that, at lower prices, this “stay away” situation could become a buying opportunity.
Why the Rivian Stock Slump is Likely to Continue
On Aug. 6, Rivian Automotive reported results for the quarter ending June 30, 2024. For the quarter, Rivian reported what can be best described as mixed results. Revenue of $1.2 billion came in line with sell-side consensus. Net losses per share, however, were wider-than-expected.
The street was forecasting net losses of $1.25 per share, but actuals came in at $1.25 per share. Rivian’s fiscal performance last quarter also represented modest growth, and wider losses, compared to the prior year’s quarter.
To make matters worse, the company also provided lackluster guidance. Full-year production forecasts were unchanged.
This 57,000 vehicle figure represents just a 14% increase compared to 2023. Rivian stock has continued to pull back since this earnings release, albeit moderately.
Still, as hinted above, much suggests that poor performance may continue. As the Detroit Free Press recently put it, “U.S. EV adoption continues to lag expectations.”
With so many “EV contenders” out there, from Tesla (NASDAQ:TSLA) to incumbent automakers, along with upstarts like Rivian, competition is leading to lower prices, and thus, further impact on margins.
Still, while RIVN could keep sinking due to disappointing results and macro challenges, there’s perhaps a silver lining.
Don’t Rule Out a Potential Return to the Buy Zone
Although we are bearish on Rivian stock at current prices, the situation could change in the months ahead. As we have pointed out previously, at prices in the midteens, the company’s positive factors remain overly baked into its valuation.
For instance, the positive impact of having automaker Volkswagen (OTCMKTS:VWAGY) as a strategic partner and investor.
Alongside this, there’s also the potential catalyst that is well over a year away from taking shape. This would be, of course, Rivian’s rollout of R2 vehicle platform.
The first R2 vehicles, which include lower-priced SUVs and crossovers, are expected to start rolling off the factory floor in early 2026.
Yet while the R2 rollout could be a game-changer for Rivian’s fiscal performance, between now and then impatience could get the better of investors. While cutting the company slack today, a few more quarters of weak results may lead to shares falling to a more discounted valuation.
Maybe, even back on down to single-digit prices. At such levels, it’s possible that RIVN becomes worthy of a second look. However, while this suggests at least keeping an eye on the situation, don’t be hasty in determining when this stock has officially reentered the buy zone.
Bottom Line: Don’t Even Try to Test Drive RIVN Right Now
Yes, anything’s possible, especially with “story stocks” like Rivian, which can make big moves on headlines and updates. Still, it’s better to err on the side of caution and stay disciplined.
In recent years, there have been waves of “EV mania,” but now we are definitely not in one of them.
Investors continue to look for reasons to sell EV stocks rather than buy them.
This isn’t likely to change until at least next year, when factors like lower interest rates help to spark a resurgence in automotive demand. In the case of this stock, a “Rivian Renaissance” may take even longer to happen.
Next year is likely to be another transitory one. It may not be until 2026 that the company’s operating performance “takes off” again, helping to spark a recovery.
With this in mind, there’s no need to overpay for Rivian stock today, even if that just means you enter a small “test drive” position in the company.
Rivian stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.