EV maker Rivian (RIVN) sees its stock slide in after-hours trading after reporting mixed fourth-quarter results, beating revenue estimates with $1.32 billion while posting wider-than-expected losses of $1.36 per share. Additionally, the electric vehicle company's production guidance is well below forecasts as it plans to reduce its workforce by 10%.

Truist Securities Equity Research Analyst Jordan Levy — who has a Buy rating on Rivian stock with a $26 per share price target — joins Yahoo Finance's Josh Lipton and Julie Hyman to break down the fourth-quarter report.

"As we go through the year, I think the biggest catalyst is going to be can they push towards those gross margins for the R1 line and the commercial vehicles," Levy explains. "That's the biggest question investors are contending with right now is can this company produce vehicles at a profit and they need to show that they can. That's... by far the most important factor."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

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JULIE HYMAN: Shares of EV maker Rivian down by 10% after the company's production target for the full year was well short of the Street's estimates. The EV maker reported a wider adjusted loss per share than expected as well and said it's cutting 10% of salaried jobs here.

So for the full year, Rivian now says it will produce just 57,000 vehicles. The average analyst estimate, I believe, was 80,000, as it does announce this cut of 10% of salaried jobs. It looks like the only number that did not miss estimates was the revenue for the fourth quarter, which came in at $1.32 billion versus the $1.25 billion that analysts had been anticipating. Production in the fourth quarter was also a little higher than estimated, although deliveries at just under 14,000, missed the average analyst estimate.

JOSH LIPTON: Yeah. And remember, headed into this report, Julie, the stock was already under a ton of pressure. It was already down about 30% so far this year. I think that was just kind of-- there have been broader questions, right, how does a company like Rivian navigate this broader slowdown in the EV market, which is tough already for a company like a Tesla. But the challenge is even more acute if you're a smaller EV startup like like a Rivian.

JULIE HYMAN: Yeah. And there is some commentary from RJ Scaringe, who is the founder and CEO of the company. In the statement here, he talked about great progress in 2023 despite economic headwinds. And he says we're excited about the year ahead. We're aggressively focused on driving cost efficiency throughout the business, achieving positive margins and building on our go-to market function to support our long term growth. And he also highlighted that the next vehicle, the R2 is still set to come out on March 7th.

JOSH LIPTON: All right.

JULIE HYMAN: We'll see.

JOSH LIPTON: Well, let's get more on this. To break down the EV makers report is Jordan Levy, Truist Securities Equity Research Analyst. Jordan, it is great to see you. So listen, Rivian reports, investors clearly not happy, at least initially here in the after hours, Jordan. But walk us through your reaction, your response to the report.

JORDAN LEVY: Yeah. Yeah, absolutely. And we're kind of in the midst of digesting the report. But you know, what it seems to be is we already kind of saw Street estimates coming in a little higher than we thought the company would report, because they are doing that mid-year shutdown. But it does seem like there's a bigger than expected kind of impact here, given all the things we know about interest rates, all the things we know about the demand environment right now.

And so it seems like they're reacting to that. They're taking their-- they announced a 10% workforce reduction and in salaried employees and that sort of thing. So they are addressing what needs to be addressed. But certainly, I think the production slowdown or the lower than expected production is going to disappoint some folks.

JULIE HYMAN: Yeah. I mean, I assume that you're amongst those folks who's disappointed, Jordan. I know that your forecast was higher than 57,000 here. Do you think that this is a factor of the general slowing in demand in the EV market? Or is there something specific to Rivian?

JORDAN LEVY: Yeah. I think it's a mix of both, right? Rivian is still kind of in that stage that Tesla was in its early life when it was in that high-priced vehicle category. Rivian still falls into that bucket ahead of when they launched the R2 vehicle. And as a result, there may be a little bit more exposed to these sort of macro swings. And so I do think that's sort of a part of the overall story.

But I think all that said, it has to be taken into account that Rivian did execute well in 2023. So some of this is being proactive on their part, I would assume.

JOSH LIPTON: And, Jordan, you do have a buy on the name, outperform. So what are the-- I guess, what are the catalysts ahead that you think moves this stock higher?

JORDAN LEVY: Yeah. We need to see the R2 platform announced. That's coming next March 7, so in a few weeks here. And then-- and then as we go through the year, I think the biggest catalyst is going to be can they push toward those positive gross margins for the R1 line and the commercial vehicles, because that's the biggest question investors are contending with right now is, can this company produce vehicles at a profit? And they need to show that they can. That's I think by far the most important factor.

JULIE HYMAN: And what about, again, getting back to the competitive landscape here? You have a couple of earlier stage, startups like a Rivian. You have a Tesla. And then, of course, you have the establishment automakers that are in this market, too. How does this year kind of shake out?

JORDAN LEVY: Yeah. Yeah. I mean, look, I think that maybe some of the concerns around growth have been somewhat overstated. This is a slowdown year. We saw interest rates go really high. You still have average EV prices that are 10,000 or more above sort of the ICE equivalent. So I do expect we'll see a slowdown in that growth rate this year.

But I do think it's going to fluctuate over time. And I think we will get back to high growth rates. I think we have to see interest rates start to flatline and come down. We have to see the consumer get more optimistic. And we have to see companies launch lower cost vehicles. And that's a big part of the story I think.

JOSH LIPTON: And, Jordan, I'm interested with Rivian, you know, they have to watch their spending, Jordan. Cost control is important for them. At the same time, they need to expand their portfolio, expand their production capacity. How should-- how should they think about that balancing act, Jordan?

JORDAN LEVY: Yeah. Look, I think what's important for them right now is getting to the launch of R2, right. I think they can throttle R1 a little bit this year on demand, because it is a higher-priced vehicle, a lower volume category. But R2 is really sort of that lower-priced model, call it in the $40,000 to $50,000 range, where I think they can make a much bigger market and a much bigger name for themselves. So that has to be part of the focus.

But on the other hand, you're right, they need to manage the capital situation. And they need to-- and I think that's why you're seeing them announce the cuts to salaried employees and that sort of thing as well.

JOSH LIPTON: And, Jordan, I'll get you out of here on this, you know, kind of a broader question. You know Rivian, and you know the broader EV space. And you look at that market right now, Jordan, and just broadly, EV sales are slowing. I'm just interested to get your take on what you think is needed to re accelerate growth for that broader market, Jordan. In your opinion, is it a question of more affordable cars? Is it a question of range, more charging stations? Or is it all three?

JORDAN LEVY: Yeah. I absolutely think it's all three. Look, like, at the end of the day, I think if you get lower interest rates, if you get a more diverse slate of lower-priced vehicles that appeal to all the categories of buyers, and, you know, as you scale that, those volumes, you also need to scale the infrastructure. I think it's all three that over time have to come to together.

But I do think in the next couple of years, call it the next four to six quarters, you could see that pick back up with just more offerings from companies and coming in at lower prices as well as a stabilization in the rate environment that gives a little more consumer confidence around that.

JULIE HYMAN: jordan Thanks a lot. Appreciate it.

JORDAN LEVY: Thank you all so much.