It shouldn’t come as a surprise to investors that Tesla news moves other stocks in the electric vehicle (EV) sector. But Tesla’s quarterly earnings report is only part of why Rivian Automotive (RIVN -4.26%) shares are sinking again today.
While much attention was on Tesla and its third-quarter earnings update, Rivian shares have quietly lost more than 10% this week. That includes a drop of 4.2% today as of 11:51 a.m. ET. It’s also part of a nearly 30% decline in Rivian shares over the last month.
Signs of dropping EV demand
Prior to last night’s third-quarter report from Tesla, investors already knew its production had dropped in the quarter compared to the second quarter. Tesla’s third-quarter production of about 430,500 EVs represented a 10% sequential decline.
Conversely, Rivian increased its quarterly production by 16.5% from the second quarter to the third quarter. However, the macroeconomic picture continues to concern investors. Tesla’s profit dropped as it lowered prices to maintain market share. And the company is on track to begin deliveries of its Cybertruck pickup truck later this year. That will be its first offering directly competing with Rivian’s R1T pickup truck, and Tesla says it has the capacity to produce about 125,000 of these vehicles annually.
Rivian can overcome headwinds
The Tesla update only compounded selling in Rivian stock since it announced it would raise new capital by selling $1.5 billion in convertible bonds earlier this month. Especially since investors thought Rivian was well capitalized, with more than $10.2 billion in cash and equivalents at the end of the second quarter.
Investors will find out more when Rivian reports its full financial and operational update on Nov. 7. However, Tesla’s comments about economic headwinds contributing to its lower earnings and profit margins, combined with Rivian’s recent bond issuance, have investors nervous.
Rivian CEO R.J. Scaringe told Reuters this week that the capital raise was meant to ensure “that we are never at risk of having a overly constrained or overly tight balance sheet.” He emphasized that the goal was to more comfortably get to the launch of its next-generation R2 vehicles with geopolitical uncertainty on the rise.
That conservative approach might be appropriate, and investors might want to take advantage of Rivian’s stock drop. That’s especially true if it confirms that operations and sales continue to move in the right direction when it delivers its quarterly report next month.
Howard Smith has positions in Rivian Automotive and Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
