Rivian Automotive(NASDAQ: RIVN) stock gained a staggering 84% in the three months between May and July. That seemingly unstoppable rally ground to a halt last month, with the electric vehicle (EV) stock losing 13.9% of its value in August, according to data provided by S&P Global Market Intelligence. Rivian shares remain under pressure and are down another 4% this month, as of this writing.
What's going on with Rivian stock?
Rivian continues to incur big losses
Rivian announced its second-quarter numbers in August, and they looked promising. Rivian's Q2 deliveries jumped 9% year over year to 13,790 units, generating roughly $1.2 billion in revenue. However, its production fell sharply, or by 31% year over year, to 9,612 vehicles. That drop in production shouldn't have come as a surprise, as Rivian had already announced a planned downtime in Q2 at its sole manufacturing plant in Illinois for a major retooling.
The retooling upgrade was important because Rivian expects much higher production efficiency and cost benefits going forward -- so much so that it is confident of achieving a positive gross profit in the fourth quarter. For perspective, Rivian generated a negative gross profit of $451 million in Q2. The plant is now also ready to ramp up production of EVs on Rivian's second-generation platform. Moreover, Rivian also reiterated its full-year production guidance of 57,000 units despite lower production in Q2.
So far, so good. Why then did Rivian shares fall in recent weeks? There are a couple of reasons.
First, Rivian reported a bigger net loss, or nearly $1.5 billion in Q2 versus $1.2 billion in the year-ago quarter. Second, there were a few hiccups for the EV maker in August, such as a fire at its plant that damaged several EVs. A shortage of parts also forced Rivian to temporarily suspend production of its electric delivery vans (EDVs) for e-commerce leader Amazon last month. Rivian has an order to deliver 100,000 EDVs to Amazon through the end of this decade.
Should you buy Rivian stock now?
There's a lot going on at Rivian that's piqued investor interest in recent months. One of the biggest recent highlights has been Rivian's deal with Volkswagen, with the two companies planning to form a joint venture. Under the deal, Volkswagen made an initial investment of $1 billion in Rivian with plans to pump another $4 billion into it through 2026. The venture will likely focus on R2, Rivian's affordable SUV that should go into production in 2026.
In between, expectations of interest rate cuts have also sparked investor interest in Rivian shares as lower interest rates will make funding cheaper. Rivian is flush with cash for now, though, having ended the second quarter with nearly $7.9 billion in cash and equivalents and short-term investments.
Some market players perhaps took profits off the table last month after the stock's rally, but investor interest in Rivian will likely remain high as the company's gross margins improve and it starts production of R2 SUVs.
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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. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Volkswagen Ag. The Motley Fool has a disclosure policy.
