Rivian Automotive: Is The Dream Of Challenging Tesla Doomed?

Shares of electric vehicle maker Rivian Automotive (RIVN) have been spiraling lower at such a rapid rate that even the company’s most faithful investors are beginning to doubt whether there will be any success in its future. The Irving, Texas-based startup has lost more than…

$120 billion in market value in the four months since it went public on Nov. 10, in one of 2021’s biggest, most watched IPOs. The stock priced at $78 ahead of its IPO but skyrocketed to $106.75 when it debuted. Currently trading at $38.05, that’s a shocking reversal from the post IPO buying frenzy that made Rivian the sixth largest IPO in US market history.

In November, investors were confident that Rivian—which has the backing of Amazon (NASDAQ:AMZN) and Ford Motor Company (NYSE:F), mega cap companies that have a 20% and 12% stake in RIVN respectively—would be one of the most promising startups to challenge Tesla’s (NASDAQ:TSLA) dominance in the EV market.

But barely four months later, Rivian’s valuation stands at about $34 billion, when market sentiment turned negative on growth stocks even as supply chain obstacles accelerated and rising inflation continues to hurt current company valuations.

At Friday’s $38.05 close, Rivian shares have dropped 79% from its record high of $179.47 hit on Nov. 16.

Last week, the latest evidence of the challenges facing Rivian’s ability to ramp production came when the company released its Q4 and full year 2021 earnings report. The company not only missed Wall Street’s expectations, but also forecast just a modest increase in vehicle production for 2022.

Rivian now expects to produce 25,000 electric trucks and SUVs in 2022, just half of the production it forecast last year as part of its IPO roadshow. In a letter to shareholders, Rivian said:

“In the immediate term, we are not immune to the supply chain issues that have challenged the entire industry. Those issues, which we believe will continue through at least 2022, have added a layer of complexity to our production ramp-up.”

Price Targets Cut

Besides the industry-wide supply side challenges auto manufacturers are facing, Rivian also seems to be finding it hard to increase its vehicle prices in order to protect its margins. The company, early this month, was forced to roll back price increases on its debut cars, the battery-electric R1T pickup and its R1S SUV, after customers began canceling their orders.

Since this embarrassing about-face, an array of analysts have cut their price targets on the stock. At least four lowered their price targets just this month—by an average of 40%, according to Bloomberg data. In a note to clients, Barclays analysts on Mar. 8 drastically trimmed their price target on the stock, saying…

 

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