In most recent developments a renowned car manufacturer Rivian seen a plunge in its stock price.
The price decline came after the company’s top leadership announced that they won’t be able to produce the number of vehicles they promised to deliver.
As the company failed to fulfill the current market demand this has created uncertainty regarding its stock.
The company’s CEO announced that by the end of 2023, the company will probably produce 10,000 fewer vehicles than it promised at the start of 2023.
This marks the company’s third recall since going public back in 2021.
The electric vehicle producer is facing challenges in achieving profitability through increased production due to the issue with the supply of the semiconductor chips
As long as the semiconductor chip supply will remain short, the company will continue to face production woes.
Despite the Production Troubles Analysts Remained Bullish
Although the share Rivian saw a decline in its price by 17%, market analysts are still confident and have taken a bullish stance to back the company’s stock price.
Rivian Automotive, Inc. That is listed on the Nasdaq Stock Exchange as RIVN and is priced at around $15.
What halted the company most is missing the profits due to production limitations.
However, the company’s overall earnings report shows a mixed trend. Analysts have argued that not everything that is highlighted in the earnings report is not bad.
In 2022, Rivian’s earnings per share exceeded expectations, which came as a pleasant surprise to the company.
The company’s per-share loss of $1.73 was lower than the anticipated loss of $1.89 per share.
But company’s actual revenue has been valued at around $663 million, but it accounts for a decline of 9% from what experts have predicted ($729.47 million).
Investors Are Uncertain About Company’s Claims
What offended investors was the company’s earlier statement that it will produce 50,000 electrical vehicles by the end of 2023. But, the recent statement from the company has disregarded its previous statement.
As per the new statement, Rivian will produce a maximum of 40,000 electrical vehicles this year. This is the third time that Rivian has adjusted its production capacity in an official statement.
Hence, investors are still doubtful whether the company will be able to achieve this feat or not.
On the other hand, the company’s production team has pointed out that a lesser-than-needed supply of semiconductor chips is what halted the company’s production capacity.
The market overall trend shows that it will take longer than expected time to meet the current demand.
Commenting on the current demand and supply situation, the company has clearly said that its production capacity is linked to the supply of semiconductor chips.
As long as the company will not get sufficient supply, it will not be able to enhance its production capacity. Even though market experts have brought this logic. But investors are finding it hard to believe this statement.
As the result, there was high selling pressure on RIVN.
Company’s CEO RJ Scaringe told the shareholders that they are doing their best to somehow purchase the extra semiconductor chips to fulfill the demand pressure.
Rivian has already taken some initiatives to fill the demand and supply gap. But, how long it would take to solve this issue is still doubtful.
EV giant will not be able to fulfill the market demand this year. The investors of Rivian are worried about the company’s ability to become profitable. They also feel that is highly unlikely that the company will achieve profitability shortly.
Rivian investors want increased production capacity as soon as possible at any cost. Although the company at the moment is not able to provide investors with what they want, its fundamentals are strong.
As of now, the company’s gross revenue estimates are profitable for 2024. Apart from that, there are some other positive indicators for Rivian.