The rise and fall of electric vehicle (EV) maker Rivian Automotive, ticker symbol RIVN, have been akin to a roller coaster ride through the rugged hills of Wall Street. In 2021, Rivian burst onto the scene with a resounding market debut, basking in the glow of the green vehicle frenzy that had enveloped investors. The stock catapulted a staggering 120% within a week, cresting at a peak of $172.01 on November 16, 2021, following its IPO at $78 per share. The company’s valuation soared past $150 billion, eclipsing established giants like General Motors and Ford.
However, the tides have since turned for Rivian, with the stock now trading at a modest $10 per share, carrying a valuation of around $10 billion. The sharp decline has left investors pondering – is this the moment where opportunity knocks? As Rivian gears up to disclose its first-quarter 2024 results on May 7, the focus is squarely on the company’s trajectory in the face of formidable challenges.
The Plunge Unveiled
Rivian, backed by heavyweights like Amazon and Ford, found itself teetering on a high wire right from the start, perched precariously atop lofty valuations. The avaricious rush towards EV startups in 2020 and 2021 painted a rosy picture, detached from the harsh realities under the hood. Puffing on the fumes of this euphoria, Rivian aimed to churn out 50,000 vehicles in 2022 but was thwarted by disruptive supply chains, chiseling down its target to 25,000 vehicles. The hiccup resulted in Ford shedding most of its Rivian stakes in 2022. The subsequent year brought a slight respite as Rivian managed to push out 57,232 vehicles.
In a recent update, Rivian disclosed its production figures for the first quarter of 2024 – crafting 13,980 machines and selling 13,588, a step down from the preceding quarter’s production of 17,541 and sales of 13,972. With a reiterated vision to roll out approximately 57,000 vehicles in the current year without any uptick in production growth, the red flags are waving briskly.
However, the storm clouds loom larger for Rivian amidst a gloomier EV landscape. Drooping demands, galloping competition, and a cloud of economic uncertainty have conspired against Rivian’s high-priced lineup, nudging potential buyers away. Touting vehicles that start at $70,000 and ascend to $90,000, coupled with inflating production costs, Rivian finds itself wading through a sea of soaring losses, casting a pall over investor sentiment.
Deciphering Risks Before Taking a Plunge on RIVN
Unveiling its fourth-quarter 2023 financials, Rivian disclosed a staggering gross loss of $43,000 per vehicle, an alarming emblem of manufacturing inefficiencies. The chasm between expenditure and revenue casts a shadow of doubt over the company’s operational prowess.
Moreover, Rivian’s temporary production halt in the second quarter of 2024, aimed at uplifting manufacturing efficiencies, raises a specter of heightened short-term expenditures. While Rivian envisions these outlays as transitory, clarity on the anticipated savings from these optimizations is indispensable before an investor takes the leap.
With the gambit of technology upgrades introduced in 2023 promising lower commercial van costs, Rivian’s ability to capitalize on this edge remains clouded. Insipid sales of these vans in the last quarter flagged subpar margins, underscoring the urgency to boost volumes for a fatter profit pie.
Despite securing a significant Amazon order for vans in 2019 and a commitment to deploy 100,000 electric vehicles by 2030, Rivian is yet to ink deals commensurate with investor expectations. The promise of Amazon’s order yielded scant results, with only a solitary high-profile deal with AT&T inked by Rivian.
Echoing louder is Rivian’s colossal production capacity of 200,000 units juxtaposed against its modest target of 57,000 vehicles in 2024, a glaring testament to slackened demand, particularly in light of its premium pricing. The muted EV demand trajectory, coupled with a congested market, foreshadows a grim narrative for all players in this tussle.
Closing the balance sheet for 2023 unveiled operating losses of $5.74 billion, a slight amelioration from $6.85 billion in 2022. Substantial hemorrhaging beckons accelerated amends.
Further clouding Rivian’s horizon is the financial landscape. The coffers closed with $10.47 billion in total liquidity in 2023, as a negative free cash flow of $5.89 billion casts ominous shadows on the financial treadmill. As operational losses mount, a perilous depletion of half the remaining liquidity lurks around the corner, entwined with the harrowing tests of scalability and financial shoot.
Anteing up the stakes for 2024, the capital expenditure is poised to escalate to $1.75 billion against $1.02 billion in 2023, mirroring amplified investments across production facilities, next-gen technologies, and market outreach.
As the production tempo wanes, Rivian is cutting prices on entry-level R1T and R1S models to lure numbed consumers in a sluggish EV expanse. These hurdles throttle Rivian’s aspirations to harbor a bright gross margin ambition by the cusp of 2024.
A glimmer amidst the gloom resides in Rivian’s plans to unfurl new R2, R3, and R3X models over the upcoming trio of years. The pocket-friendly R2, commencing at $45,000, is slated for a late-2026 birthing, while the sportier R3 and R3X are poised for a late-2026 or early 2027 touchdown.
Charting the course for 2024, Rivian envisions a $2.7 billion loss pre-interest taxes, depreciation, and amortization, a shade lesser than the $3.9 billion figure from 2023. Shaping a bedrock around go-to-market infrastructure and R2 development, Rivian envisions a trade-off via cost streamlining, technology assimilation, supplier accords, and opex streamlining.
Valuation Unveiled
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