Why Rivian tanked ahead of earnings after the bell

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened?

Investors have punished the stock of Rivian Automotive (NASDAQ: RIVN) this year, sending its shares down by more than 60%. The negative sentiment was still in evidence Thursday ahead of its fourth-quarter and full-year report, which is due out after the closing bell. Shares of the electric vehicle start-up were down almost 10% in early trading, and remained lower by 9% as of 1:12 p.m. ET.

So what?

In this next report to investors, the company will be forced to confront early missteps such as a lack of communication regarding the departure of its chief operating officer, its failure to hit internal production estimates for 2021, and a recent price increase it was forced to walk back. But investors will be more interested in what Rivian says about its prospects for ramping up its production volume, updated reservation data, and its plans for expansion. They will be particularly interested to hear about the status of its contract to sell up to 100,000 commercial delivery vans to Amazon.com Inc (NASDAQ: AMZN). 

Now what?

Supply chain problems are being reported by most automakers — large legacy names as well as start-up EV makers. Rivian has already made it clear that its materials costs are increasing. And after having to backtrack on its announced price increase for existing reservation holders, the company will now have to bear those added costs itself. Investors will want to hear more details about those higher expenses and how they will affect margins. 

While its 60% year-to-date share price decline may seem to create a tempting entry point, investors should keep in mind that the company still carries a lofty market cap of $36 billion. 

Any downward adjustments to its 2022 production estimates or suggestions that its path to profitability will take longer than previously forecast will likely knock the stock down even further. Those details are what investors should focus on in Rivian’s report when it arrives. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Rivian tanked ahead of earnings after the bell appeared first on The Motley Fool Australia.

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Howard Smith owns Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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