California-based electric vehicle (EV) company Rivian Automotive RIVN reported its third-quarter 2024 results, which fell short of Wall Street’s expectations. The EV maker faced significant challenges, particularly in production and supply chain disruptions, which impacted its revenues and profitability. CEO RJ Scaringe described the quarter as challenging, and the company widened its full-year loss expectations. On a slightly positive note, management reaffirmed its 2024 delivery outlook and maintained its goal of achieving a modest positive gross profit in the final quarter of this year.

At this juncture, investors may wonder if Rivian is a buying opportunity now, especially with its stock price having declined lately or should investors wait for more concrete signs of recovery?

Inside RIVN’s Q3 Results

Earnings & Revenues Miss: Quarterly loss of $1.03 per share was wider than the Zacks Consensus Estimate of a loss of 89 cents but narrower than a loss of $1.19 per share incurred a year ago. Revenues came in at $874 million, missing the consensus mark of $970.7 million and also declining 34.6% year over year.

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Production & Delivery Challenges: Rivian’s production capabilities took a hit this quarter due to supply chain issues, specifically a shortage of a crucial part for its Enduro motor system. Production totaled 13,157 units, down from 16,304 units in the same quarter last year. Deliveries mirrored this slowdown, dropping 35.6% year over year to 10,018 units, signaling waning demand for Rivian’s higher-priced EVs in an increasingly competitive market.

Gloomy Guidance for 2024: Following its weaker-than-expected results, Rivian lowered its adjusted EBITDA forecast for the year, with projected losses ranging from $2.83 to $2.88 billion, compared to the prior forecast of $2.7 billion. Last month, the company cut its annual production guidance to 47,000-49,000 vehicles from the previous expectation of 57,000 units owing to supply chain challenges. The updated forecast implies a contraction of 16% at the midpoint of the guidance on a yearly basis. This represents a slowdown for Rivian, which should have rather been in a growth mode. While RIVN reaffirmed its 2024 delivery outlook in the range of 50,500-52,000 vehicles, it represents a modest growth from 50,122 units delivered in 2023.

Promising Developments Underway for Rivian

While RIVN’s third-quarter show was rather lackluster, several strategic moves position Rivian for potential gains in the coming years.

Partnership with Volkswagen: The German auto giant is set to inject $1 billion into a joint EV venture. This collaboration will focus on shared EV technology and software, with Volkswagen VWAGY planning an additional $4 billion investment down the line. This alliance is expected to bolster Rivian’s technology base and expedite production timelines, potentially giving Rivian an edge in a market driven by technological advances.

Low-Cost Models: Rivian has ambitious plans to diversify its product lineup with the upcoming R2, R3, and R3X models, which are expected to cater to more budget-conscious consumers. With the R2 — a midsize SUV slated for release in the first half of 2026 and priced at around $45,000 (that’s nearly half of the price point of its current R1 lineup)— Rivian aims to capture a wider market. Scaringe highlighted R2’s potential to become a “fundamental driver of Rivian’s growth.” The company expects R2 to account for the majority of its production, forecasting an annual output of 155,000 R2 units and around 85,000 R1 models, contributing to a more balanced revenue stream and improving margins.

Battery Deal With LG Energy: To support its ambitious production goals in the years to come, Rivian has secured a new battery supply deal with South Korea's LG Energy Solution, ensuring a reliable source of U.S.-manufactured battery cells for its R2 line. Lately, LG Energy has inked battery deals with quite a few automakers, including Ford F and Renault RNLSY. As battery supply-chain stability is crucial in the EV market, this deal could play a pivotal role in Rivian’s long-term success.

Cost Cut Measures: To boost profitability, Rivian has implemented cost-saving measures at its manufacturing facility in Normal, IL, streamlining production processes and reducing production complexity by cutting the number of joints in vehicle assembly. These upgrades have boosted the R1 production line rate by 30% and the Gen 2 R1 models are projected to lower material costs by approximately 20% over the next year. It remains committed to achieving a positive gross profit by the fourth quarter of 2024, which, if successful, could signal an important turning point for the company. Rivian intends to reduce material costs further through economies of scale from R2 production volumes and by enhancing revenue per unit via product differentiation, software and services. Rivian expects R2 to cut costs by around 45% compared to the second-generation R1.

RIVN’s Price Performance & Valuation

On a year-to-date basis, shares of RIVN have declined 57%, underperforming the industry, sector and the S&P 500 index.

YTD Price Performance 

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RIVN is currently trading at a forward sales multiple of 1.86, slightly higher than the industry but lower than its own average of 3.11 over the last five years.

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A Wait-and-Watch Approach for RIVN Stock

For now, Rivian’s journey forward is a mix of promise and uncertainty. With Donald Trump winning the election, concerns about potential shifts in EV policies are growing. Trump has expressed opposition to EV incentives and emission standards, which could impact federal support for EV makers like Rivian. Adding to the worries are the company’s production and supply chain setbacks, although they seem to be temporary headwinds.

On the optimistic side, Rivian’s reaffirmation of its fourth-quarter target for positive gross profit is a positive signal, especially when many analysts are skeptical that RIVN might be withdrawing from its target.  Strategic partnerships with Volkswagen and LG Energy and cost-saving efforts are positive developments, while the launch of the R2 model could expand its customer base.

The Zacks Consensus Estimate for 2024 and 2025 bottom line implies year-over-year improvement.

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For now, potential investors should wait for the company’s initiatives to start delivering tangible results and for the regulatory environment to become clearer. Those already invested might consider holding onto the stock, as Rivian’s strategic moves and upcoming offerings warrant a cautiously optimistic outlook despite near-term challenges.

RIVN stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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