What happened
Rivian Automotive (RIVN 6.10%) stock surged this morning and rallied as high as 9.6% as of 11:10 a.m. ET. The hot electric vehicle (EV) stock cooled off a bit as the day progressed but was still trading 6.5% higher as of 1:30 p.m. ET Thursday.
With Rivian shares sinking lower and lower in recent weeks, investors perhaps believe the worst might be over and were therefore buying the beaten-down stock one day ahead of earnings.
So what
Just yesterday, Rivian was in the news for all the wrong reasons. Barclays analyst Brian Johnson slashed his price target on Rivian stock by nearly 60% to $47 a share as he sees margin pressure on the company driven by rising costs of raw materials. Rivian stock closed Wednesday at $42.21 a share.
TheFly.com also reported a class-action lawsuit against Rivian yesterday involving the EV maker's shocking recent move to raise vehicle prices and then roll back part of the decision. Among other things, the lawsuit claims the risk to Rivian's reputation and the potential threat of cancellations of preorders suggests Rivian's stock price was "artificially and materially inflated" during its initial public offering.
Image source: Rivian Automotive.
Investors, though, appear to believe much of these challenges may have already been baked into Rivian's falling stock price and that the EV maker could provide some positive surprises on March 10 when it reports its fourth-quarter and full-year 2021 numbers after market close.
Last quarter, Rivian reported revenue worth only $1 million in the three months ended Sept. 30 against the delivery of its first 11 R1T pickup trucks, but its net loss ballooned to $1.2 billion as its operating expenses jumped 141% year over year.
The consensus now is that Rivian could report at least around $38 million in revenue for the fourth quarter and as much as $75 million on the higher side, and could also trim its operating losses.
Now what
It's hard to predict what Rivian might say tomorrow, but I'd act on the side of caution. The EV maker has already given the market enough signals of the intense cost pressure it's facing, including the unexpected dramatic increase it recently announced on the price of its vehicles, citing inflationary pressure.
While Rivian quickly rolled back the decision to demand higher prices for preorders received before March 1, its move has raised several questions about the EV maker's prospects. I expect management to spend a good deal of time tomorrow explaining its move in a bid to salvage investor faith, but eventually, unless the company can prove it has what it takes to produce at scale and do so profitably, Rivian shares could struggle to sustain any momentum they gather in between.
