Rivian stock (NYSE: RIVN) closed lower yesterday after it released its first-quarter delivery report. Tesla stock too fell as the EV giant’s first-quarter deliveries fell short of estimates. Here are the key takeaways.
Rivian produced 9,395 vehicles in the first quarter of 2023 and delivered 7,946 of these. The deliveries were largely in line with estimates but both the production and deliveries fell as compared to the fourth quarter.
However, Tesla’s first-quarter deliveries were slightly higher than the fourth quarter. The stock nonetheless closed 6% lower yesterday.
Rivian produced 10,020 vehicles in the fourth quarter and delivered 8,054. In 2022, it produced 24,337 cars and delivered 20,332 of these. The company’s 2022 production fell short of its guidance. Notably, Rivian’s guidance was anyways half of the original guidance of 50,000 cars.
Rivian maintains 2023 guidance
In its prepared remarks, Rivian said that Q1 2023 production and delivery results “remain in line with the company’s expectations, and it believes it is on track to deliver on the 50,000 annual production guidance previously provided.”
Some Wall Street analysts were disappointed with Rivian’s first-quarter delivery report and CFRA Research analyst Garrett Nelson downgraded the stock from a sell to a strong sell.
Nelson said, “The report likely indicates that Rivian has continued to burn through cash at an alarming rate and is nowhere near generating even a gross profit, much less a net profit.”
CFRA downgrades RIVN stock
To be sure, Rivian expects to post a gross loss in 2023. Its CFO Claire McDonough however said during the Q4 2022 earnings call, “we anticipate improving on a dollar basis for the year as we reduce our cost of goods sold per vehicle produced, improve our average selling prices per vehicle and begin to see our LCNRV charge decline.”
RIVN expects its adjusted EBITDA to be -$4.3 billion in 2023, $900 million lower than in 2022.
Meanwhile, Rivian said that it expects to become gross profit positive in 2024. It said that the cash burn would “improve meaningfully” in 2025. Over the long term, the company is targeting a gross profit margin of 25%, a high teen EBITDA margin, and a 10% free cash flow.
Rivian expects its production to be higher in the second half
During the Q4 earnings call in February Rivian said that it expects production and deliveries to be higher in the second half of the year. It said, “We expect full year production to be back-end weighted due to supply constraints we believe will alleviate in the second half of the year and the commercial line downtime we’re taking in Q1 2023.”
Rivian is targeting a total annual production capacity of around 600,000 cars between its Normal and Georgia plants. It aspires to capture 10% of the global automotive market share which might seem a tall ask considering the massive competition. The company is currently producing the R1T pickup, R1S SUV, and EDV (electric delivery van). At the upcoming factory in Georgia, Rivian would produce the affordable R2.
RIVN and Amazon are considering ending the exclusive agreement
Amazon is Rivian’s largest stockholder and has placed an order for 100,000 electric delivery vehicles.
Meanwhile, Rivian is looking to end its exclusive agreement with Amazon as the e-commerce giant is considering buying only about 10,000 of these vehicles in 2023.
An Amazon spokesperson said, “While nothing has changed with our agreement with Rivian, we’ve always said that we want others to benefit from their technology in the long run because having more electric delivery vehicles on the road is good for our communities and our planet.”
Notably, Amazon has been looking to cut costs and has announced two rounds of mass layoffs and also stopped construction at its HQ2 in Virginia.
EV competition is increasing
Meanwhile, the competition in the EV industry is increasing, and Rivian faces tough competition from General Motors’ Silverado and the GMC Hummer, and Ford’s F-150 Lightning. Ford has restarted production of the F-150 Lightning and also increased the pricing.
The electric pickup segment is still an attractive proposition as the competition is not as high as sedans and SUVs. Also, Tesla which has been at the forefront of the price war still does not have an electric pickup. The Elon Musk-run company expects to begin the deliveries of its Cybertruck later this year but does not expect mass production until 2024.
The bullish case for Rivian stock
Morgan Stanley is bullish on Rivian stock and its target price implies the stock almost doubling from these levels.
In a client note, it said, “While the stock offers a rather wide risk/reward skew ($5 bear case to $55 bull case) we remain compelled by the company’s differentiated product, scalable end markets, cost cutting potential, cash balance, and valuation.”
Canaccord expects Rivian stock to almost triple and finds its $1.3 billion capital raise a positive. It is also constructive on the company ending its exclusive deal with Amazon and said, “To date, Rivian’s commercial vehicles have been bound to Amazon. However, we see significant room for additional market share from new partners,” they wrote.”
Bank of America, which has a $40 target price on Rivian said in a note “We maintain our Buy on RIVN, which is predicated on our view that it is one of the most viable among the start-up EV automakers and a relative competitive threat to incumbent OEMs (and possibly to other automotive-related verticals).”
Rivian’s Q1 2023 delivery report wasn’t all that disappointing
As for the first quarter delivery and production report while some bearish analysts are “disappointed” Rivian had guided for sequentially lower production and deliveries due to planned maintenance.
However, markets would closely scrutinize the company’s 2023 performance as investors have been quite unforgiving of EV companies that are failing to execute even on the modest delivery guidance.
We’ll next hear from Rivian when the company reports its Q1 2023 earnings in May and among others markets would watch the cash burn.
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