Is electric vehicle manufacturer Rivian Automotive (NASDAQ:RIVN) finally turning a corner? You might be tempted to think so, especially after the recent rally in Rivian stock. This is no time to be complacent, however, as Rivian is about to face a crucial test.
Also, as we’ll see, there’s unfavorable news for Rivian Automotive in California’s legal system. When you combine this with Rivian’s other potential problems, it’s difficult to construct a persuasive bullish argument now.
Rivian Stock: The Pop Before the Drop?
It’s true that Rivian stock popped in June and the first half July. Let’s take a big-picture perspective, though, as the stock is still down year-to-date and over the past 12 months.
Any recent share-price gains could be lost soon, as there’s a key event coming up soon. As we warned you and InvestorPlace contributor Rich Duprey also warned you, Rivian Automotive will release its second-quarter 2024 financial results on Aug. 6.
Bear in mind, Rivian is a consistently income-negative company and, according to a Barron’s report, profits “aren’t expected for years” for Rivian Automotive. If the market front-ran its assumption that Rivian will post amazing second-quarter results, this could be a setup for a major letdown.
Sure, a miracle could occur and Rivian Automotive might justify its summertime stock rally with outstanding results and optimistic forward guidance. Are you really prepared to wager your hard-earned capital on this, though?
A Setback for Rivian in California
Barron’s concisely summarized the slew of problems that Rivian Automotive has to deal with in 2024. These include a slowdown in EV demand, U.S.-China trade frictions and “threats from former President Donald Trump to remove subsidies and increase tariffs if he retakes the White House later this year.”
To all of that, we can now add another problem to the list. Unfortunately for Rivian Automotive, a judge in California ruled that the automaker will go to trial because of allegations that Rivian encouraged employees who defected from Tesla (NASDAQ:TSLA) to steal Tesla’s trade secrets.
According to Judge Theodore C. Zayner of California’s Santa Clara County Superior Court, “Tesla’s evidence establishes that some Rivian employees were less thoroughly investigated and not disciplined.”
Rivian Automotive did reportedly investigate this matter. However, Zayner determined that Rivian’s self-investigation wasn’t “conclusively” shown to be “adequate.”
Court battles aren’t just unpleasant; they can also be lengthy and expensive for all parties concerns. Tesla can surely afford to absorb the costs of prolonged litigation more easily than startup Rivian Automotive can.
In any case, it’s another issue for Rivian to deal with, as if there weren’t enough problems already.
Rivian Stock Is Vulnerable in August
Rivian Automotive will release its quarterly results on Aug. 6, after a substantial stock rally already took place. Thus, the risk-to-reward proposition doesn’t look favorable right now.
Rivian already has plenty of problems, and now the company has to justify its share-price run-up.
If you read this early enough, you should still escape. If Rivian Automotive’s second-quarter results and forward guidance aren’t stellar, Rivian stock is vulnerable to a pullback. So, make any defensive portfolio adjustments that you deem necessary while the escape hatch is still open.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.