Rivian Automotive: Key Metrics to Watch Ahead of Upcoming Earnings Report

Shares of Rivian Automotive (NASDAQ: RIVN) have struggled in recent years, losing around 90% of their value since hitting the public market in 2022. Although the electric vehicle (EV) maker’s products have received positive reviews from automotive experts, the company faces challenges with slow growth and significant cash burn.

Despite these hurdles, Rivian’s management is hopeful about a turnaround. Here are three critical factors investors should monitor in the company’s upcoming fourth-quarter earnings report.

1. Gross Profitability Prospects

Rivian CEO Ryan Scaringe has sparked optimism regarding the company’s fourth-quarter earnings, set to be released on February 20. He aims to achieve a “modest” gross profit in the last three months of 2024. This goal is supported by reduced material costs and increased reliance on nonautomotive revenue sources, including green car credits — regulatory incentives available for sale to automakers that fall short of emissions standards.

Achieving gross profit in the fourth quarter of 2024 would mark a significant improvement from the same quarter in 2023, when Rivian reported a staggering loss of $124,162 per vehicle sold, totaling about $1 billion.

This potential turnaround could enhance Rivian’s stock value by showcasing management’s capability to meet objectives and potentially paving the way for sustainable profitability. However, gross profits are just one element to consider.

2. Signs of Accelerating Growth

While gross profitability is important, it focuses solely on revenue versus direct manufacturing costs. To define a pathway to net income, Rivian must consider operating costs, such as salaries and research expenses, which are typically significant.

Top-line growth is what Rivian truly needs. Unfortunately, data indicates that the company delivered only 14,183 vehicles from October to December, a mere increase of 1.5% over the previous year.

Unlike established manufacturers like Tesla, which can endure sluggish or negative revenue growth, Rivian is not yet entrenched in a sustainable business model. Relying on the sale of regulatory credits may help short-term, but these credits will likely diminish in value as more automakers shift focus to electric vehicles themselves.

3. New Products and Strategic Partnerships

Ultimately, Rivian’s fortunes may hinge on new products from its mid-sized vehicle platform, which will support more affordable models like the R2, projected to debut at $45,000 in 2026, in contrast to the R1S starting at $75,900. These lower-priced vehicles could stimulate growth by reaching a broader market. Investors should anticipate updates about Rivian’s progress in launching these models.

Image source: Getty Images.

Additionally, Rivian’s partnerships will be crucial in the upcoming earnings. In November, the company entered a $5.8 billion joint venture with Volkswagen to collaborate on software and electronics for their vehicles. This partnership is expected to provide essential funds and help both companies achieve cost efficiencies in their electric vehicle systems.

Teamwork with a financially strong partner like Volkswagen may be just what Rivian needs to endure until it can launch new models in 2026 and 2027, potentially igniting growth. As of September, Rivian had $6.74 billion in cash and short-term investments, but faced a quarterly operating loss of around $1.17 billion.

Should You Buy Rivian Stock Before February 20?

The fourth-quarter earnings will be significant for Rivian as it anticipates a shift towards gross profitability. However, ongoing slow revenue growth and dependency on selling regulatory credits raise concerns about a viable long-term business model.

Rivian’s survival largely relies on the success of its upcoming affordable vehicle lines. Therefore, it remains uncertain whether this stock is a promising investment at this time.

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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.