Rivian Automotive’s stock has been ravaged for the start of 2022. Investors must be perplexed as to what, if anything, can turn the investing tide. They haven’t heard anything new on the subject from Wall Street in a while, so something other than analyst research will have to help Rivian in the coming months.
According to S&P Global Market Intelligence, the electric vehicle (EV) stock was down 22.6 percent for the week at 10:30 a.m. ET Friday. At this point, Rivian has fallen by more than 41% year to date.
Rivian is trying to deal with some issues. Fears of rising interest rates are wreaking the most havoc on highly valued, speculative stocks. Companies like Rivian, which have no or limited current sales, will generate the majority of their earnings and cash flow in the future. When interest rates are higher, those earnings are worthless when discounted today.
Stocks of EV companies with no or little revenue have fallen by about 27% so far in 2022. Those with significant sales are down approximately 14% on average. In addition, shares of Tesla (TSLA), the market leader in EVs, have fallen about 11% year to date.
Rivian has only issued one press release this month, and it was a one-liner: All the company said was that as of the end of 2021, it had produced 1,015 vehicles and delivered 920. The company had previously predicted that it would produce 1,200 vehicles in 2021, but management announced in December that it would fall short of that goal. Investors should not have been surprised when Rivian announced the actual numbers given the forewarning. So, what is causing the stock to be so unstable right now?
Initially, the Federal Reserve’s plan to raise benchmark interest rates this year to combat inflation has sparked a sell-off in growth stocks. One of them is Rivian: Even after a recent drop, its market capitalization is still impressively high at $57 billion. When you consider that Rivian just started delivering its first electric vehicles late last year, is losing money, and has only generated $1 million in revenue through the first three quarters of 2021, it’s easy to see why many traders have recently been unloading this speculative EV stock.
Rivian’s financial report in mid-December was a big disappointment. Now, investors and analysts alike are waiting to see if the electric vehicle maker’s 2021 production shortfall was a fluke or if it will be able to ramp up production as planned.
