Why Rivian and Other EV Stocks Dropped Last Month

What happened

Several electric vehicle (EV) start-up stocks dropped enough in March to approach or hit all-time lows. That included Rivian Automotive (NASDAQ: RIVN), luxury electric sedan maker Lucid Group (NASDAQ: LCID), and electric utility- and lifestyle-van maker Canoo (NASDAQ: GOEV). But the monthly share price change is also heavily weighted from the first day of the month.

For the full month, Rivian, Lucid, and Canoo stocks were down 19.8%, 11.9%, and 12.8%, respectively, according to data provided by S&P Global Market Intelligence. However, the first day of March was significant as investors reacted to Rivian’s fourth-quarter earnings report released the prior evening. Taking out the moves on that first day shows that most of Rivian’s monthly loss actually occurred on March 1.

RIVN data by YCharts.

So what

That’s because investors were unhappy with what Rivian forecasted for its 2023 production. And that brought down several other EV start-up stocks at the same time. Most auto manufacturers faced supply chain and other headwinds in 2022. Early-stage companies were particularly affected when raw material prices spiked, and needed parts were delayed just as they were working to ramp up production.

So investors were very much looking forward to what these companies would say about how much production volumes would increase throughout 2023. That’s where Rivian, as well as Lucid, disappointed industry followers.

Now what

After struggling to reach its lowered production goal of 25,000 vehicles in 2022, Rivian did say it plans to double that volume in 2023. But investors were expecting even more, with Wall Street analysts expecting between 60,000 and 65,000 vehicles. Rivian also revealed it was burning through cash and planned to throttle its growth spending this year. That added to investors’ disappointment after Lucid offered lower-than-expected production guidance for 2023 several days earlier.

Rivian and other EV stocks continued to drop to near-52-week lows throughout March before staging somewhat of a rebound. But even with the stock’s recovery, it remains down by more than 60% over the past year.

Similarly, investors have been selling Lucid and Canoo shares over the past year. Those stock sales have reduced Canoo’s valuation by more than 90% in 12 months as it works to begin production and generate revenue.

2023 will be a defining year for many EV start-ups. Canoo has announced a more than $50 million capital raise through a common stock offering, even as its share price has plummeted. The stock won’t likely have a catalyst to rebound until it shows it can successfully produce and sell its niche electric vehicles.

Both Rivian and Lucid, however, have fairly significant cash balances and are generating revenue. Rivian also has a large customer and investor in Amazon, which will help boost its order backlog. Even without Amazon, though, Rivian’s preorders continue to grow. Conversely, Lucid has seen fewer reservations for its high-end, luxury electric sedans.

While still plenty risky, of the group, Rivian is the one in which investors may want to invest a proper allocation of funds for a long-term investment. The decline in March has provided an opportunity at better prices.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Howard Smith has positions in Amazon.com, Lucid Group, and Rivian Automotive. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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