Rivian’s stock guidance was lowered and shares are falling

The one from Rivian NASDAQ: RIVN The fourth quarter release further demonstrates that the EV market bubble has burst. Internal metrics and guidelines suggest that demand has peaked and current capacity is excessive. The point is, business isn’t going to get better anytime soon; If Rivian can’t start turning a profit, it will go down in history as the wild buffalo.

Not all market participants are unhappy with the results. Whoever sold 15% of the stock short in the market sits comfortably, with the market down 25% on the day, setting an all-time low for the stock. Since the outlook is so bleak and profits are still years away, short sellers will likely lean into this trade, and if not, sellers will likely encounter a bounce and keep this market in a downtrend.

Rivian implodes on mixed results and weak guidance

Rivian had a rough quarter in the fourth quarter, ramping up production for what appears to be no reason. The company’s revenue beat consensus estimates, but overproduction negatively impacted profits, leading to a larger-than-expected loss. Revenue of $1.32 billion increased 100% year over year and beat analysts’ consensus target by 470 basis points, which may be the only good news. As for production and deliveries, production exceeded 17,500 units, with only 80% delivered, and deliveries decreased sequentially.

The news on margins is some of the worst. The company significantly improved its gross profit per vehicle, but the gains were overshadowed by inventory costs and CAPEX, resulting in a deeper-than-expected loss. The company reported adjusted losses of $1.73 per share, $0.41 less than expected, and the outlook is no better.

Rivian’s Q4 run rate is 70,000 annualized deliveries versus the expected 57,000 deliveries. This more than suggests that the company will slow production in the next year, which is good for total costs but bad for leverage. The company expects annualized losses to be around $2.7 billion in EBITDA.

Rivian moves to cut costs

Rivian announced it is cutting 10% of its salaried workforce to reduce costs. The cuts add to a select number of hourly workers, but it may be too late. The company still has $9.7 billion on its balance sheet, but $2.7 billion in annualized losses will quickly reduce that. With the electric vehicle market stalling, Rivian is unlikely to reach expected profitability. Furthermore, price cuts intended to attract more consumers are likely to continue to impact results and prospects in 2024. The race now is not to increase production but to achieve profitability while maintaining a competitive advantage over Tesla NASDAQ:TSLA and other EV OEMs.

Analysts support Rivian but are lowering their price targets and ratings following the release. Among the most notable revisions is that of JPMorgan Chase, which downgrades to Neutral and sets its new low price target. This target assumes the stock is fairly valued at its new low near $11. The consensus target assumes a 100% upside, but it is falling rapidly and may not support price action.

The technical perspective: Rivian is being taken to the landfill

The price action in the RIVN is not promising for anyone except a bearish trader. The market fell more than 25% and is moving lower following the news. The volume is also the highest in months, suggesting a high-conviction move by the market. If this market fails to find support soon, it will likely continue to fall until there are signs that profits are coming soon.

As it stands, Rivian is at risk of losing its institutional support, which is significant. Institutions own more than 60% of the shares, with Ford Motor Company NYSE: F AND Amazon NASDAQ:AMZN listed as topholder. They are unlikely to shed their holdings anytime soon, but other institutional holders and funds are more likely to cut losses.

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