4 Inexperienced Flags for Rivian Automotive’s Future

4 Inexperienced Flags for Rivian Automotive’s Future

Rivian Automotive (RIVN 2.35%) has dissatisfied a number of buyers since its IPO in November 2021. The electrical automobile maker went public at $78 and its inventory soared to its all-time excessive of $172.01 that very same month, but it surely now trades for about $15 a share.

Rivian initially attracted a number of consideration as a result of it was backed by Amazon and Ford Motor, and it aimed to supply 50,000 autos in 2022. Sadly, powerful provide chain headwinds prompted it to solely produce 24,337 autos through the yr. Its manufacturing goal for 50,000 autos in 2023 has additionally fallen wanting the consensus forecast for at the least 62,000 autos — and it quietly stopped updating its whole R1 pre-orders within the fourth quarter of 2022.

Rivian's 2022 R1T pickup.

Picture supply: Rivian.

Ford finally divested most of its stake in Rivian, whereas Amazon — which had agreed to buy 100,000 electrical supply vans (EDVs) from the corporate — additionally began to purchase some electrical vans from its rival Stellantis. Rivian additionally issued a number of remembers and was focused by security complaints from its personal staff. And a latest $1.3 billion debt providing has sparked contemporary considerations about its near-term liquidity.

All of these purple flags has made Rivian a tricky inventory to like although it appears to be like dust low-cost at simply 2.5 instances this yr’s gross sales. By comparability, Tesla trades at 5.7 instances this yr’s gross sales, but it surely additionally produced 1.37 million autos in 2022. For Rivian to drive away the bears, it wants to boost just a few inexperienced flags.

Thankfully for the bulls, 4 latest developments counsel it is nonetheless too early to jot down off this fallen EV inventory.

Inexperienced flag #1: its manufacturing replace

On April 3, Rivian mentioned it had produced 9,395 autos and delivered 7,946 autos within the first quarter of 2023. It additionally reaffirmed its full-year manufacturing goal of fifty,000 autos. Traders might want to wait till Could 9 to see its full first-quarter financials, however that replace suggests there will not be any nasty near-term surprises for the bulls.

Inexperienced flag #2: extra cost-cutting strikes

Rivian’s adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) loss widened from $2.8 billion in 2021 to $5.2 billion in 2022, and analysts solely anticipate a barely narrower lack of $4.5 billion in 2023. It ended 2022 with $12.1 billion in whole liquidity, however that represented a steep drop from $18.4 billion a yr earlier.

Rivian’s resolution to chop 6% of its workforce this yr, which can match its 6% discount final yr, signifies that it is streamlining its enterprise to stem the bleeding. It will not break even anytime quickly, but it surely’s taking just a few steps in the proper course.

Inexperienced flag #3: Amazon’s newest replace

Rivian plans to ship 100,000 EDVs to Amazon by 2030. However that deal has been powerful to quantify as a result of the 2 corporations have been cagey with the main points. That caginess has prompted some bears to consider that Amazon might comply with Ford’s lead and divest its stake in Rivian, which has been a useless weight by itself bottom-line development.

However on the finish of March, Amazon mentioned it was already fulfilling deliveries in over 500 U.S. cities and areas with a fleet of greater than 3,000 Rivian EDVs. That is triple the quantity Amazon reported final November, and means that intently scrutinized partnership remains to be going robust. Amazon additionally revealed that it had delivered 75 million packages with Rivian’s EDVs.

Inexperienced flag #4: a possible finish to Amazon’s exclusivity

Rivian is locked into an unique EDV contract with Amazon, which positioned a agency order for 10,000 EDVs for 2023 as a part of its long-term order for 100,000 autos. Nonetheless, Rivian has lately held talks with Amazon to finish that exclusivity.

If that occurs, we might see Rivian’s EDV enterprise break freed from its chains and appeal to extra retailers like Walmart, which invested within the struggling electrical van maker Canoo final yr simply to forestall it from offering autos to Amazon, and logistics giants like Fedex, which plans to go all-electric by 2040.

Is Rivian’s inventory price shopping for proper now?

These 4 inexperienced flags point out Rivian is not down for the rely but, however additionally they do not absolutely cancel out all its earlier challenges and make it a screaming cut price. I personally consider Rivian’s inventory will stagnate by at the least the primary half of this yr till it proves that it might probably ramp up its manufacturing and slender its losses.

Due to this fact, I would not rush to purchase Rivian proper now — particularly when so many different extra promising EV makers are nonetheless on sale.

John Mackey, former CEO of Entire Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Leo Solar has positions in Amazon.com. The Motley Idiot has positions in and recommends Amazon.com, FedEx, Tesla, and Walmart. The Motley Idiot has a disclosure coverage.