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Why Rivian Stock Tumbled in December and Continues to Fall

By Neha Chamaria – Jan 5, 2022 at 3:55PM

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Rivian is struggling to live up to its goals even as competition heats up.

What happened

After a stunning debut on the Nasdaq Stock Market on Nov. 10, 2021, that saw Rivian Automotive (RIVN 7.50%) leap past $100 billion in market capitalization within the first two trading days, the electric vehicle (EV) stock soon ran out of gas and ended the month of December down 13.4%, according to data provided by S&P Global Market Intelligence. Rivian's first earnings report as a public company left much to be desired.

So what

Rivian started to lose steam in late November after some things seemed to go against the EV maker's favor. Ford Motor Company, for example, which bought $500 million in the electric truck start-up in 2019 as part of a strategic partnership, decided to abandon plans to co-develop an electric truck with Rivian.

Meanwhile, a California judge asked Tesla to expedite its lawsuit against Rivian alleging the theft of documents and trade secrets by former employees who left Tesla for Rivian. Even as investors started to weigh the potential financial loss Rivian could face if it loses the lawsuit, the truck maker announced mid-December that it wouldn't be able to meet its production target of 1,200 vehicles in 2021 given the supply constraints. Rivian had produced only 650 R1T trucks and delivered just about 384 units by Dec. 15, 2021.

A 2022 Rivian R1T pick-up truck.

Image source: Rivian Automotive.

Also, Rivian generated only $1 million in revenue through the nine months ended Sept. 30, 2021, but suffered a steep loss of $2.2 billion over the period, forcing EV investors to rethink whether the stock was worth the humongous market cap it commanded. It didn't matter that Rivian's R1T truck won the 2022 MotorTrend Truck of the Year award, or that multiple analysts turned bullish about the stock's prospects in December. Notable analyst ratings Rivian stock received included:

  • Morgan Stanley analyst Adam Jonas calling Rivian the one that could challenge Tesla and giving it a price target of $147 a share.
  • RBC Capital analyst Joseph Spak positing a price target of $165 a share on Rivian.
  • Wells Fargo analyst Colin Langan giving Rivian a price target of $110 a share.
  • Bank of America analyst John Murphy giving Rivian stock a price target of $170 apiece.
  • Piper Sandler analyst Alex Potter giving Rivian shares a price target of $148 a share.

J.P. Morgan, Deutsche Bank, and Goldman Sachs were just some of the other research firms that released bullish notes on Rivian in December.

Now what

Although Rivian fell short of its production target in 2021, it received 71,000 preorders for R1T trucks as of Dec. 15, 2021, over and above the orders for 100,000 electric vans it already has from e-commerce giant Amazon. Rivian is also expanding capacity at its Illinois plant to 200,000 units a year and expects to start construction of second plant in Georgia this year with an annual capacity of 400,000 vehicles per year.

Yet with so many automotive start-ups coming up, Rivian has a lot to prove to justify its sky-high valuation. Even as I write this, Stellantis has just struck multi-year agreements with Amazon to co-develop software solutions and supply its new Ram ProMaster battery-electric vehicle in 2023. That means rising competition for Rivian, which is why the stock's already feeling more pressure in January so far.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon and Tesla. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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