Rivian Q1 preview: Where next for Rivian stock?

Market chart
Josh Warner
By : ,  Market Analyst

When will Rivian release Q1 2022 earnings?

Electric carmaker Rivian is scheduled to release first quarter earnings after US markets close on Wednesday May 11.

 

Rivian Q1 earnings preview

Rivian started producing its long-awaited R1T electric pickup truck last September and managed to also produce a handful of its R1S electric SUVs before the end of the 2021. Rivian managed to deliver 1,015 vehicles before the year was out and all attention is now on how well the company is able to ramp-up production this year with the company having set itself an ambitious target to manufacture 25,000 vehicles in 2022.

We already know that Rivian produced 2,533 vehicles in the first quarter of 2022, of which 1,227 of them were delivered to customers. This demonstrates how quickly Rivian needs to increase output in order to meet its annual goal considering it would need to treble output to produce an average of over 7,500 vehicles in the remaining three quarters of the year to achieve it.

With this in mind, revenue is expected to come in at $130 million in the first quarter and Wall Street anticipates Rivian will report an adjusted Ebitda loss of $1.17 billion and a net loss at the bottom-line of $1.43 billion.

Drumming-up demand is not the issue considering Rivian had 83,000 orders in the US and Canada for the R1T and R1S as of March 8, which is in addition to the order from its major shareholder Amazon that has ordered 100,000 of Rivian’s Electric Delivery Vans (EDV) aimed at corporations trying to turn their fleets green.

But meeting that demand is more of a challenge considering the entire automotive industry is grappling with supply chain bottlenecks and a shortage of chips and other key components. Rivian has warned it expects supply chains to remain under pressure ‘through at least 2022’, adding a further layer of complexity to the already challenging task of ramping-up output from scratch. The fact it is working on three models provides yet another test for the business.

‘The plant is starting to ramp nicely despite the quarter getting off to a slow start and persistent supply chain constraints. Through the first half of Q1 2022, we experienced several headwinds and other factors impacting our production ramp, including a planned 10-day shutdown to fine-tune our production lines, significant supply chain limitations, a large spike in COVID-19 cases likely attributable to the Omicron variant, and severe winter weather in Central Illinois,’ said Rivian in early March.

The company’s first factory is in Normal in the state of Illinois. Rivian has said it would be able to produce 50,000 vehicles in 2022 if its supply chain wasn’t suffering disruption and this is why it is only targeting half of that to take the shortage of parts into account. The end goal is to get the factory producing 200,000 cars per year and Rivian is already working on a second site in Atlanta in Georgia. Once both factories are fully operational, Rivian will have the capacity to make around 600,000 vehicles each year.

The supply chain problems are also pushing up costs across the industry, which has prompted virtually all players to raise their prices as a counterattack against inflation. Rivian hiked prices in early March and this caused a stir on social media as customers that had already placed orders were told they would also need to fork out more money, forcing the company to make an embarrassing U-turn by vowing to fulfil existing orders at the original price. This is significant as prices could weigh on demand if they keep rising.

Plus, with so many orders on its books, customers could face a lengthy wait to receive their vehicles if supply chain headwinds make it harder for Rivian to step-up output. Questions remain over whether customers are loyal to the Rivian brand or if a long wait will push them to opt for alternatives they can get their hands on quicker. That is significant considering the likes of General Motors and Ford have already launched their own electric pickup trucks.

Rivian is understandably still burning through cash as it invests heavily into its production facilities and is forecast to report a free cash outflow of around $1.8 billion in the first quarter. Currently, Wall Street believes Rivian will burn through over $7 billion in free cashflow in 2022 as a whole. Investors can take some short-term comfort from the fact it had over $18 billion in cash at the end of 2021, but consensus figures suggest it will burn through billions more over the coming years and suggests it could need to find more cash before it can become self-sustaining.

 

Are investors losing confidence in Rivian?

Rivian’s share price has been rattled just days ahead of the results by news that Ford is looking to reduce its 12% stake in Rivian by selling 8 million of its 102 million shares in the company after a lockup period that prevented some early investors from cashing-out expired over the weekend, according to Bloomberg.

Notably, reports also suggested that another unknown seller is looking to offload a further 13 million to 15 million shares in Rivian at just $26.90, which has reset the price of the company. Some reports have injected fears that this could potentially be Amazon, which owns an 18% stake in Rivian. If true, that would mean Rivian’s two most well-known investors would be downsizing their stake in the business.

It is not just the fact that some of its largest investors are proving eager to get out given the first opportunity but also that they look set to do it at a discount, raising questions about Rivian’s valuation once again. Rivian listed at $78 per share when it went public last November and hit as high as $180 soon after listing as hype swept the market.

That meant Rivian was valued at over $150 billion just six months ago, even though the first car was just rolling-off the production line. At the time, markets believed Ford – one of the largest carmakers in the world – was worth less than $80 billion. The picture is far more sobering today and the tables have turned considering Rivian touts a valuation of just under $26 billion while Ford’s market cap is more than double that at just over $57 billion.

Ford has said its stake in Rivian is nothing more than an investment after revealing it was no longer working with the Rivian on electric cars, which in turn has intensified competition considering they are both selling electric pickup trucks.

 

Where next for RIVN stock?

Rivian shares have been stuck in a steady downtrend since hitting all-time highs just days after going public late last year but news that investors are selling up at a price of $26.90 has reset Rivian’s share price and caused a correction in the market, sending the stock to a new all-time low of under $24.

The stock could prove volatile going forward and there is no telling where the bottom could be for Rivian shares, but $27 should linger as a new psychological level in the markets until something new appears to provide a new valuation.

The results this week could prove to be just that. Any disappointment amid challenging supply chain conditions will only add pressure to Rivian’s valuation and send the stock lower while an upbeat outlook that shows it is navigating the tough conditions could help propel the stock back above $27, although a move above $30 to $35 would be needed to break out of the current downtrend.

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