Why Rivian Automotive Inventory Misplaced Practically Half Its Worth in December

What occurred

Electrical automobile producer Rivian Automotive (RIVN -1.32%) is scaling again its ambitions as we enter what could possibly be a troublesome patch for automakers. Traders are apparently getting nervous: They despatched Rivian shares down by 42.5% in December, in response to knowledge supplied by S&P World Market Intelligence.

So what

Rivian joined the general public markets in November 2021 to nice fanfare, with its share value surging by as a lot as 53% following its preliminary public providing and valuing the electrical automobile producer to a market cap of greater than $100 billion. The expectations baked right into a valuation like that, nevertheless, may be onerous to fulfill, and the corporate has since then confronted a number of challenges that tempered buyers’ enthusiasm for the inventory.

Manufacturing automobiles at scale is troublesome and dear. Rivian final yr raised the costs on its well-received electrical pickup, and in September introduced it will work with Mercedes-Benz Group to collectively manufacture electrical supply vans as a substitute of going it alone.

Then in December, Rivian scaled again its expectations additional: It  put the partnership with Mercedes on maintain to preserve capital to be used in different areas of its enterprise. The announcement got here at a time when a spread of auto retailers, together with CarMax, had been warning that customers are more and more dealing with affordability challenges that would restrict the gross sales of high-end automobiles.

In a weak marketplace for progress shares normally, Rivian’s company-specific information despatched buyers racing for the sidelines.

Now what

Within the wake of the December decline, Rivian shares are actually 83% beneath the worth the place they debuted simply over a yr in the past. Traders who had been as soon as intrigued by the potential of the corporate are actually very a lot in wait-and-see mode, and it could possibly be some time earlier than a catalyst emerges to get the inventory charging greater once more.

Rivian has a wholesome order e-book, and there is clear demand for its supply automobiles from Amazon (a Rivian investor) and others. The corporate is ramping up manufacturing and dealing by way of a number of the provide chain points that held again gross sales in 2022. However we face an unsure financial local weather, and a number of automakers are more and more including electrical automobiles to their choices in what’s turning into a crowded market.

It is means too quickly to name Rivian a failure, however after a roller-coaster 2022, it seems many buyers are content material to attend to see what the longer term brings earlier than shopping for the shares, even at their present low costs.