Fast-growing electric truck startup Rivian (RIVN-US) surprised markets by announcing earlier this week that it would lay off as much as 5% of its workforce, as CEO RJ Scaringe explained to employees the need for the move on Friday. .
Wall Street expects Rivian’s sales to rise to $6.2 billion next year from $1.8 billion this year, and the company is expected to need more staff at a time of rapid growth, but the company announced a shocking layoff.
Shares of Rivian tumbled 6% after the layoffs were announced, but after the company’s apparent focus on efficiency, shares recovered later in the week, closing up 2.5% at $31.60 a share on Friday.
Scaringe said the company is optimizing its operations, prioritizing some projects, halting hiring for certain non-manufacturing roles, and implementing major cost-cutting measures to reduce material expenditures and operating expenses.
He revisited the company’s layoffs and goals in a meeting with Rivian. “We are also embarking on an organisation-wide alignment process to ensure we are as focused, nimble and efficient as possible in delivering on our priorities and goals.”
Scaringe’s goals include increasing production of the R1T electric truck, as well as increasing production of electric delivery vans sourced by Amazon (AMZN-US), while accelerating the development of the next electric vehicle to offer customers more pricing options. As a result, employees in the company’s manufacturing division do not appear to be on the verge of layoffs.
Dan Ives, an analyst at Wedbush, believes that Rivian’s unsustainable hiring pace and some layoffs are not surprising when orders start to recover, which also sends some signals to Wall Street that the company is monitoring operating costs rather than spending money. Throw money.
Investors and analysts have traditionally focused on the company’s spending and cash burn. Rivian expects to use about $7 billion in 2022 and about $1.5 billion by the end of the first quarter of this year.
Therefore, Ives believes that the company’s layoff measures are positive news, and he gave the company’s stock a “buy” rating with a target price of $40. Overall, Wall Street remains bullish on Rivian stock, with about 61% of analysts giving it a buy rating and the average S&P 500 buy rating at 58%.
However, bullish Wall Street has not buoyed the stock this year, which is still down about 70% so far this year as inflation and higher interest rates hurt most auto stocks. The broader auto sector in the Russell 3000 (RUA-US) is down about 34% so far this year.
Rivian is also facing some internal issues. Wall Street had expected the company to ship about 40,000 vehicles this year, but ramping up production has apparently been harder than expected, with the company now expecting to ship just 25,000 this year.
