Rivian stock (NYSE: RIVN) is trading over 12% higher in US price action today and is on track for its eighth straight trading session of gains after Wedbush Securities issued a bullish note on the startup EV company.
In his note, Wedbush analyst Dan Ives said, “We believe after a number of ‘one step forward, two steps back’ excuses for Rivian and supply chain headaches, the company is finally making a major turn towards executing on its longer term business model.”
Rivian stock rises on a bullish note from Wedbush
Notably, like fellow automakers, Rivian battled supply chain issues in 2022. Last year, it produced 24,337 cars and delivered 20,332 of these. The company’s production fell short of its toned-down guidance of 25,000 – which was anyways half of the original guidance of 50,000 cars.
Rivian blamed supply chain issues for lower-than-expected production and stressed “we believe that supply-chain constraints will continue to be the limiting factor of our production.”
Lucid Motors also missed the 2022 production target. However, while Rivian attributed lower production to supply chain issues, Lucid has also alluded to weak demand.
RIVN’s Q1 deliveries were better than expected
Earlier this week, Rivian reported its second-quarter deliveries. It produced 13,992 vehicles and delivered 12,640 of those. The deliveries were well ahead of the 11,000 that analysts were expecting.
In his note, Ives said, “The EV manufacturer does believe it is on a steady track to hit its 50,000-production guidance given for FY23 and we believe this is a solid step forward for Rivian in its efforts to deliver on expectations, putting the company in a great position to continue its production ramp while hammering in on cost optimization as one of its largest strategies.”
Tesla posted better-than-expected deliveries in Q2
Notably, Tesla also surpassed second-quarter delivery estimates and the Elon Musk-run company extended its winning streak after the stellar delivery report.
Tesla produced 479,700 cars in the second quarter of 2023 as compared to 258,580 in the corresponding quarter last year. The company’s deliveries rose 83% YoY to 466,140.
TSLA expects to produce 1.8 million cars in 2023 but Musk said that the number could rise to as high as 2 million. It has set itself an ambitious task of producing 20 million cars annually by the end of 2030 – which is nearly twice what the market leader Toyota Motors currently sells.
Currently, it has two Gigafactories in the US and one each in Shanghai and Berlin. The company is setting up the next Gigafactory in Mexico and Musk last month met Indian Prime Minister Narendra Modi and talked about investing in the world’s fifth largest economy “as soon as humanly possible.”
Rivian posted better-than-expected earnings in Q1
Rivian reported revenues of $661 million in the March quarter which were ahead of $652 million that markets expected. Its per-share loss of $1.25 was also narrower than the $1.59 that analysts were expecting.
Responding to an analyst question on the demand for RIVN cars, CEO Robert Scaringe said that the company’s order backlog extends “well into 2024” – reiterating what he said during the previous earnings call.
Scaringe added, “the engagement we have with customers and the level of satisfaction that our early customers the first 35,000-or-so customers are having really creates a powerful flywheel where our biggest, and I would say, most important advocates are the buyers of our vehicles.”
Notably, both Rivian and Lucid Motors have stopped providing reservation numbers which markets see as a sign of tepid demand.
RIVN took a novel approach to selling cars
Rivian took a novel approach to selling vehicles and last month it held a one-day event at the parking lot of its Normal factory where customers could come and buy its cars.
Like Tesla, Rivian sells its vehicles online where users place an order with their preferred specifications that are then later shipped.
This is unlike legacy automakers like Ford and General Motors who have a sprawling sales and service network across the US.
Rivian currently offers the R1T pickup truck and R1S SUV. At the sales event, the company sold the R1T but emphasized that it is not selling the model at a discount. 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.
EV competition is rising
The electric pickup segment is still an attractive proposition as the competition is not as high as in sedans. 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 model is running way behind schedule and Tesla received yet another jolt when its supply chain executive Mustapha El Akkari joined Rivian earlier this month.
Rivian is lowering its cost base
Like fellow startup EV companies, Rivian continues to burn cash and posted negative free cash flows of $1.8 billion in Q1 2023 – wider than the $1.45 billion in the corresponding quarter last year.
Rivian ended the quarter with $11.78 billion in cash which excludes the $1.5 billion revolving credit facility.
During the quarter it raised $1.5 billion in cash through the sale of convertible bonds. Given the perennial cash burn, startup EV companies have had to raise cash at frequent intervals to keep their operations running.
Previously, Rivian said that it has enough cash to fund its operations until 2025.
The company has taken several measures including two rounds of job cuts to lower its cost base.
Rivian is building a plant in Georgia
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.
At the upcoming factory in Georgia, Rivian would produce the affordable R2 where production is slated to begin in 2026 – one year behind the original schedule.
All said, despite the spike over the last week, RIVN is up only about 25% for the year and underperforming the Nasdaq as well as Tesla.
Wedbush meanwhile sees Rivian stock moving higher from these levels and raised its target price by $5 to $30. Ives stressed, “We continue to strongly believe in the Rivian long-term story … making this a table pounder at current levels.”
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