What happened

Rivian Automotive (RIVN 2.44%) stock plunged Wednesday morning and was trading down by a whopping 17.2% as of 12:54 p.m. ET.

The electric vehicle (EV) maker announced its fourth-quarter numbers and production guidance for 2023 Tuesday evening, and it turns out that the narrative remains similar to what it was last year: Rivian is burning through cash at a dizzying pace and fell short of production estimates yet again as supply chain bottlenecks lingered.

Investors are furious, and analysts are losing confidence in Rivian stock.

So what

In 2022, Rivian halved its original production forecast to 25,000 vehicles due to supply chain issues, and still underperformed, managing to produce only 24,337 for the year.

Yet as management persisted in saying that it was prioritizing Rivian's production ramp-up, the analysts' consensus estimated the company would produce around 60,000 vehicles this year. However, Rivian said it lost several days of production in Q4 because of supply shortages, and it expects the challenges to persist this year. It therefore forecast that it will produce only 50,000 vehicles in 2023.

Rivian ended 2022 with a net loss of $6.7 billion and negative free cash flow (FCF) of $6.4 billion versus a negative FCF of $4.4 billion in 2021. So although Rivian is spending money on expansion and growth, it's making nothing from the vehicles it's producing. Also, Rivian ended the year with $12 billion in cash and equivalents on the books, down from the $18 billion it exited 2021 with.

Investors are miffed, and so are analysts. Several firms rushed to cut their price targets on Rivian stock Wednesday after earnings, according to The Fly, among them:

  • RBC Capital, which cut its target price to $28 a share from $50 per share;
  • DA Davidson, which cut its target price to $16 per share from $23 a share;
  • Wedbush, which cut its target price to $25 a share from $37 per share;
  • Canaccord, which cut its target price to $40 a share from $55 per share.

Now what

It's typical for EV start-ups to lose money in their initial years as building cars is a capital-intensive business. Yet Rivian is evidently struggling to produce vehicles at scale, and that's worrying investors as low volumes will continue to hurt its margins even as competition heats up. Rivian says it expects its gross margins will remain negative in 2023.

Rivian plans to focus on its core business this year, and estimates its capital spending will only be around $2 billion in 2023. That includes previously planned investments from last year that the company will make this year instead. Rivian's capital expenditures for 2022 were only around $1.4 billion versus the $2 billion it projected in the second quarter.

Being prudent about spending when it's already burning so much cash sounds like a wise move, but investors don't want to wait any longer to see Rivian's efforts start producing real profits. And right now, it's anyone's guess when that'll happen.