RIVN Stock Outlook: What Rivian Investors Should Be Watching in Q3

Rivian’s (NASDAQ:RIVN) Q2 results were mixed. I feel that this quarter will be crucial for Rivian’s stock performance. Revenue increased. It grew 3% year-over-year. Revenue reached $1.158 billion in Q2 2024. This beat analyst estimates of $1.13 billion. Another positive was the delivery of 13,790 vehicles. However, production dropped by a significant percentage: 31% from Q1 this year. Its losses per vehicle are also mounting steadily at $32,700 each. Overall, I rate RIVN stock a “hold due” to its mixed bag of results. 

The third-quarter results this year will provide more clarity, especially concerning its gross margins. Further positive developments for the company will edge it towards a buy recommendation. Investors should closely pay attention to its third-quarter results and adjust their positions accordingly.

Here are three things to watch for Rivian stock this quarter. It could be a make-or-break moment in the company’s history.

Production Ramp-Up

Rivian aims to produce 57,000 vehicles in 2024. Analysts expect Q2 results to be flat this year due to factory shutdowns and upgrades. They also expect factory shutdowns to result in cost reductions realized later this year, according to Reuters. During the shutdown period, Rivian also launched its next generation of R1 vehicles, such as the R1S SUV and the R1T pickup truck. Automakers describe these vehicles as having “hundreds of hardware improvements, performance upgrades, a fully redesigned software experience, new in-house drive systems, and many new features, updates and design elements throughout.”

On the production front, Reuters noted that the new R series has a “simpler manufacturing process” compared with its older counterparts. This new process is designed to allow the company to stem the tide of its cash burn issues. The average selling price of Rivan stock’s EVs fell from $94,000 in Q4 2023 to $84,000 last quarter. 

Rivian’s next-generation R Models will be crucial for it to compete with Chinese manufacturers like BYD Company (OTCMKTS:BYDDF), which has persistently undercut U.S. EV makers. Companies like Tesla (NASDAQ:TSLA) are finding ways to pivot to being more budget-friendly while still preserving its competitive advantage. Time will tell if Rivian is able to do the same.

Financial Health for RIVN Stock

Rivian has $7.87 billion in cash. It has also burned through $4 billion in cash over the past twelve months in operating cash flow. When adjusted for capital expenditures that figure rises to $5.03 billion. Volkswagen’s investment of $5 billion into Rivian stock could boost its total cash to $12.87 billion. The company then has a little over two years based on its current rate of liquidity consumption to help get its margins under control and stop bleeding cash.

By some measures, Rivian’s position could deteriorate in the short term as the company has reportedly depleted its inventory amid its factory shutdown in April. Due to already having $6.30 billion debt, a depleted cash base would see it become a highly leveraged company, which would significantly discount its upside when adjusted for the risks involved. 

However, its enhanced R1 line of vehicles is anticipated to enhance its gross margins significantly, so this is a vital play for the company in order to avoid situations such as over-leveraging or diluting shareholders via equity financing.

Rivian Stock is a Hold

Despite the risks involved, Rivian is navigating a difficult period for virtually all EV manufacturers, especially those in the U.S. The consensus among analysts is that Rivian stock’s efforts will pay off as it ramps up deliveries of its simpler-to-produce EVs. For instance, its top-line yearly revenue is expected to swell to $26.65 billion in FY2028, while its EPS will improve by around 75% at -1.17.

There are no concerning, company-specific factors that I can see that would warrant a “sell” for Rivian stock. Conversely, there seem to be few catalysts as well aside from it adjusting its product line.

Newer models in Rivian’s pipeline, such as the R2 crossover and the R3 and R3x hatchbacks are expected to build upon Rivian’s streamlined production process. However, these vehicles are not expected to be released until 2026 or later. Additional cash savings must be unlocked over time to ensure Rivian’s survival as an automaker.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.