Holding steady in the high teens per share, I can see why some investors may believe now is an opportune time to accumulate shares in Rivian Automotive (NASDAQ:RIVN). Yet while it may seem as if RIVN stock could continue to find support at these price levels, an upcoming event may just well knock it down to new lows.
I’m talking about the electric vehicle maker’s upcoming earnings release. Post-market on Feb. 28, Rivian will release its results for the fourth quarter and full year 2022. RIVN will also provide updates to guidance for 2023. The focus will be on the latter rather than the former, given that Rivian has already revealed its 2022 production and delivery figures.
Although it’s possible Rivian pleasantly surprises investors with an upbeat production/delivery forecast for the current and coming quarters, there’s much to suggest this will not be the case.
The Next Big Event for RIVN Stock
With last month’s relief rally reversing course, as macro uncertainties come back into focus, Rivian stock has experienced a modest pullback in price. However, the next move for Rivian will come from its aforementioned next big event.
Investors bullish on RIVN stock believe that this “big event” will result in a big move to the upside for shares. Citing production and delivery trends in recent quarters, they are confident that the company will report a high production target (50,000), as well as an increase in reservations, in its quarterly guidance update.
Given that Rivian produced over 10,000 vehicles, I agree that producing 50,000 vehicles this year is likely achievable. The company’s current reservation backlog totaled 114,000 as of Nov. 7. There’s more than enough existing demand to turn this production ramp-up into massive sales/delivery growth.
But when it comes to further reservation growth I’m a bit more skeptical. Taking into account several factors, it appears more likely that Rivian’s latest reservation figures will be disappointing, not delightful. If this figure underwhelms, chances are this “next big event” will result in a massive move lower for shares.
An Excuse to Sell
When it comes to wowing RIVN stock investors, it’s not simply a matter of getting annual vehicle production up to above 50,000. Rivian also needs to report that the brand is still growing its customer base. As I hinted above, this may not be happening, for several reasons.
Delays resulting from last year’s supply chain headwinds could be leading some reservation holders to cancel. Recent articles about Rivian’s current challenges have cited examples of this happening. As existing reservations are perhaps dropping, the company could be struggling to replace them with new potential buyers.
Tesla’s price cuts may be convincing some would-be Rivian buyers that a sedan or SUV from Tesla, less expensive and with a far shorter delivery time, is preferable to this company’s offerings.
Competition from Ford, formerly a major Rivian investor, could be affecting reservation growth as well. As I’ve discussed previously, Ford could give this EV maker a run for its money, as it rolls out models like its F-150 Lightning electric pickup.
If these factors result in lackluster reservation growth, or perhaps a net reservation decline, fairweather fans of RIVN could use this as an excuse to sell.
The Best Move Ahead of Earnings
It’s not just production hiccups and competition that may be hurting demand growth for Rivian. The current economic environment, which could reduce demand for EVs in the near term, stands to have an impact as well.
Put simply, there’s a lot out there that could cause Rivian’s latest reservation figure to fall short of expectations. Even if it exceeds expectations in areas like production and cash burn, this aspect of the upcoming report alone may be enough to push shares back toward its 52-week low ($15.28 per share).
The downside risk from a poorly-received earnings/guidance release far exceeds the possibility of the company exceeding expectations.
I lean bearish on RIVN stock, but even if you are more bullish than I am on its long-term prospects, now’s not the time to be entering and/or holding a position.
RIVN stock earns a D rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in F. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.