Will Rivian earnings offer hope to electric-vehicle investors?
The latest share price drop could signal a good opportunity to buy for the long term, but investors should proceed cautiously. If Rivian falls short of expectations, it could see further downside.
Electric vehicle (EV) upstarts mounted some hot initial public offerings (IPOs) last year, and Rivian (RIVN) was maybe the biggest star.
But actually getting cars into the market has proven difficult, and investors will be watching closely when Rivian reports its earnings Thursday for any new details that their investment is starting to pay off.
Because for everyday investors, Rivian’s stock has been a steady disappointment. It’s down 35% in just the last week following a price-hike uproar, and hit another new low today.
What Rivian is expected to report
In all, Wall Street expects Rivian to post a fourth-quarter loss of $1.87 per share, or $1.6 billion, on revenue of $60 million when it reports results Thursday after market close. That would be an improvement from the $12.21 net loss per share last quarter. Analysts expect full 2021 revenue of around $60.5 million. Net losses are expected to come in at $8.31 per share for the year, or roughly $7 billion.
Investors will also learn where Rivian stands in terms of meeting or falling short of its vehicle production targets and what to expect going forward. Rivian announced during its last quarterly earnings release that it expected to come up short on projected vehicle deliveries for 2021.
The course of Rivian’s stock price
Like many other EV startups that went public over the past two years, shares of Rivian have surged, then crashed.
At the time of this writing, Rivian stock is trading at $45.27, down nearly 42% from its November IPO price and down nearly 75% from its November all-time high.
The EV maker went public in mid-November at an IPO price of $78 per share, valuing the EV maker at $66.5 billion. Rivian is the fifth-largest IPO in US history, according to Reuters.
The stock opened for trading even higher on November 10 at $106.75 per share and closed four days later at $172.01. At that high, Rivian was valued at $146.7 billion, surpassing the market value of several legacy automakers including Ford (F) and General Motors (GM). Ford closed that same Tuesday with a valuation of $77.8 billion, while GM stood at $90.8 billion.
It’s been steadily downward since, partly due to a broad market rotation out of growth and technology stocks. In mid-December the stock fell below its first-day trading price and it hit a new low today.
For more information and the full chart of the stock’s performance, see our dedicated guide to Rivian Automotive stock.
Troubles, including price-hike fiasco and production delays
During Rivian’s third-quarter 2021 earnings release in December, the company said in its shareholder letter that it was cutting vehicle production expectations for the year. Rivian said it expected “to be a few hundred vehicles short” of its 2021 production target of 1,200. The company said it faced supply chain issues and trouble ramping up production of its battery modules for its vehicles.
Investors will know on Thursday when Rivian reports its earnings just how far off the company was from its production target. Investors should also get some insight into the number of vehicles Rivian expects to produce in 2022.
Separately, Rivian’s share price took a hit recently when the company made the sudden decision to hike the prices of its R1T and R1S, not just for new orders going forward, but also for existing reservation holders.
The company faced immediate backlash from its customers. Existing reservation holders would have to pay more money for a vehicle that was already facing production delays. Rivian walked back its planned price increase and ultimately decided to honor the original price for customers already under reservation.
In a letter from Rivian CEO RJ Scaringe two days later, Scaringe acknowledged that the price increases “broke the trust” that Rivian had worked to build with its customers.
But the damage may already be done. The stock has fallen 35% since the price hike announcement last week.
So is it a buy now?
Rivian investors, like other EV investors, are betting the companies can produce enough cars in the future to compete against the auto giants.
Ahead of Rivian’s earnings release, it’s hard to buy based simply on today’s bottom line without knowing total 2021 production numbers and the outlook for 2022.
That being said, of the 15 analysts covering Rivian stock, 11 give it either a Strong Buy or Buy, versus just four Holds and no Sells of any kind. Analysts also give the stock an average price target of $120.86, which would represent a mouth-watering 177% upside from its current price.
Rivian faces fierce competition in the EV market. Not just from other startups or EV leader Tesla (TSLA) but also legacy automakers that have been investing billions of dollars to expand their EV capabilities. Beyond its consumer lineup, Rivian is collaborating with Amazon (AMZN) to launch a Rivian Commercial Van (RCV) into the commercial market. Amazon has already ordered 100,000 electric delivery vans, and Rivian will likely aim to increase output each year to hold onto this partnership. The partnership is one reason Rivian won so much early interest.
In the third quarter of 2021, Rivian launched a new 3.3 million square foot manufacturing plant in Normal, Illinois, which is capable of producing 150,000 vehicles, with an expected increase of up to 200,000 vehicles with additional investments.
Rivian also announced in December it was building a second manufacturing plant in Atlanta, which will have a 400,000 annual production capacity. Construction on the $5 billion assembly plant and battery factory is expected to begin in summer 2022, and the start of production is slated for 2024.
In short, this share price correction could signal a good opportunity to buy for the long term, but investors should proceed cautiously. If Rivian continues to not meet its quarterly delivery estimates and continues to fall short of expectations, the stock could see further downside. At the time of publication, Matt Miczulski owned shares of RIVN, GM, TSLA and AMZN.
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