Rivian Automotive (RIVN) is looking to challenge Tesla (TSLA), Ford (F) and General Motors (GM) with its adventure-styled electric vehicles. RIVN shares surged 40% in December, but have come back to earth to begin 2024, falling more than 20%.
Rivian ended 2023 on a high note as interest in electric-pickup trucks appeared to be picking up following initial deliveries of the Tesla Cybertruck. At the end of December, Baird even designated RIVN as a „best idea“ for 2024. The firm wrote that Rivian has remained supply constrained relative to demand longer than several of its EV peers. Baird added that Rivian seems well positioned for a strong 2024.
However, RIVN shares have dropped to begin the new year. On Jan. 17, as the stock has declined around 27% on the month, Deutsche Bank downgraded Rivian to a „hold“ rating, down from a „buy,“ and cut its price target to 19, from 29. The firm sees downside to the company’s 2024 volume and margin outlook, expecting volume guidance of 65,000 units.
Rivian will report fourth-quarter and full-year earnings and revenue on Feb. 21. Wall Street expects a loss of $1.34 per share, compared to a $1.73 per share loss in 2022. Analysts also predict Q4 revenue will double to $1.27 billion.
On Jan. 2, Rivian topped its own 2023 vehicle production forecast, but the electric-vehicle maker fell slightly short of Wall Street predictions for deliveries.
The company said it produced 17,541 units and delivered 13,972 vehicles in the fourth quarter. Analysts had predicted fourth-quarter vehicle deliveries growing 75% to 14,000.
The Irvine, Calif.-based company also announced that for the full year it produced 57,232 vehicles and delivered 50,122. While Rivian exceeded its own 2023 production forecast at 54,000 vehicles, Wall Street called for full-year deliveries surging 155% to 51,000 units.
Rivian stock plunged 10% on the announcement.
RIVN Gets Boost From AT&T And Ford
The January decline comes after RIVN gained 40% in December, moving above key levels of resistance and clearing an aggressive entry point.
On Dec. 14, AT&T (T) announced that starting in 2024 it will begin „piloting“ Rivian vehicles in its fleet. AT&T expects to begin adding the Rivian Commercial Van and R1 vehicles to its fleet in early 2024. It is unclear how many Rivian vehicles AT&T will order. The company partnership also sees AT&T as the exclusive provider of connectivity to all Rivian vehicles, in the U.S. and Canada.
Rivian had announced during its third-quarter earnings it would allow more customers beyond Amazon (AMZN), which remains a key buyer, to purchase its commercial electric vans.
On Dec. 11, news broke that Ford halved its F-150 Lightning production forecast, citing „changing market demand“ according to a company memo obtained by Automotive News. The automaker now expects to manufacture 1,600 of the EV pickups per week at its Rogue Electric Vehicle Center in Dearborn, Mich.
Meanwhile, Rivian surprised Wall Street on Nov. 7, reporting better-than-expected third-quarter revenue and raising its EV production guidance for the full year.
Rivian lost $1.19 a share in Q3, less than feared, while revenue jumped 149% $1.34 billion, slightly above views. That marked the fifth straight quarter of smaller year-over-year losses, according to FactSet.
Rivian Stock: Tesla Cybertruck Competition Or Opportunity
Tesla delivered its first 12 Cybertrucks on Nov. 30. The long-awaited arrival of the new Tesla vehicle sent Rivian shares 7.6% higher the following day.
The EV giant is offering three trims of the Cybertruck, with the rear-wheel drive version starting at $60,990 with a 250 mile range. The base model will be available in 2025, according to Tesla’s website.
The all-wheel drive version has a starting price of $79,990 with 340 miles of range. Tesla is also offering a top end trim, called the Cyberbeast, starting at $99,990 with a 320 mile range. Both the all-wheel drive version and the Cyberbeast have 2024 deliveries.
Four years ago, Tesla announced the price would start at $39,900 with Chief Executive Elon Musk previously saying he wanted to price the base model under $50,000. Originally, Tesla and Musk stated the tri-motor Cybertruck would have 500 miles of range with the dual-motor model managing 300 miles and the base rear-wheel version getting 250 miles per charge.
The price point and the unique design language of the Cybertruck may lead more consumers to look at Rivian’s offerings.
Bumps In the Road For Rivian
The EV startup has been on a roller-coaster ride since its initial public offering two years ago, due both to overall market conditions and execution hiccups. Meanwhile, supply-chain issues have hampered the entire industry. Rivian has also had problems of its own complicate its launch.
Bumps in the road have included product recalls and price increases that had to be rolled back.
Rivian is not likely to be profitable for a while as it continues to ramp up production. After third-quarter earnings, a number of firms lowered RIVN price targets. However, Goldman Sachs raised its price target to 25, up from 23, writing it could be more positive on the stock if it gains more conviction around Rivian’s path to profitability.
„With a quarterly cash burn in the neighborhood of $1 billion and the company still nowhere near hitting the mass production rates which would achieve a more competitive cost structure, we see further difficulties ahead,“ CFRA analyst Garrett Nelson added in a note on Nov. 8 to investors.
The Road To Profitability
In Sept. 2023, UBS initiated coverage of Rivian stock with a neutral rating and 26 price target.
Rivian should reach positive gross margin in 2024 but larger volumes are not expected until later this decade and an additional capital raise will be needed to support future growth, according to UBS.
The EV startup currently produces an electric pickup-truck, SUV and commercial vans. In the first half of 2023, Rivian produced 23,387 vehicles. In all of 2022, it churned out 24,337 vehicles and delivered 20,332 units. That number fell short of Rivian’s stated production goal of 25,000 units for the year.
Rivian makes its vehicles in Normal, Ill. The plant has a production capacity of 150,000 units annually. The factory is expected to shutdown in the second quarter of 2024, with a one-week shutdown in Q4, to introduce new vehicle technology to the R1 platform.
CEO RJ Scaringe has said the global semiconductor chip shortage had been the „most painful“ constraint to ramping up production. Management also cited „very sizable increases“ in the cost of key metals, including lithium, nickel, aluminum and cobalt.
„Increasing our production is the primary lever in our path to profitability,“ the company said earlier in 2023.
Rivian added in its Q3 release it expects 2023 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to be a loss of $4 billion, better than its previously expected $4.2 billion loss.
The EV startup also reduced its 2023 capital expenditures forecast to $1.1 billion, down from $1.7 billion.
Meanwhile, on June 20, Rivian announced it signed a deal to use Tesla’s supercharging stations beginning in 2024. Ford and General Motors along with a slew of other automakers had previously signed similar deals with Tesla.
Rivian Stock IPO
Rivian rolled out the first all-electric pickup truck, the R1T, on Sept. 14, 2021, and its R1S SUV in the fall of 2022. The company launched with great fanfare on Wall Street.
On Nov. 9, 2021, the much-anticipated RIVN IPO priced strong, an upsized 153 million shares at $78 a share — above the expected range. Rivian stock has since fallen well below its IPO price.
Nevertheless, Rivian had a monster IPO, raising $11.9 billion and giving the company an initial valuation of roughly $77 billion. Rivian stock soared to 179.47 on Nov. 16, 2021, then sold off sharply over the following weeks and months.
Amazon Has 18% Stake In Rivian
Rivian is currently prioritizing production of electric vans for Amazon. The online marketplace already has around 1,000 Rivian commercial vans delivering packages in major cities in the U.S. It has ordered 100,000 of Rivian’s electric vans.
Rivian reported in its Q3 results it has amended the exclusivity portion of its Amazon agreement allowing the company to sell commercial vans to other customers.
Amazon currently has a 16.8% stake in Rivian, according to FactSet. However, Amazon is also looking elsewhere to electrify its fleet. On Jan. 5, 2022, Amazon and Stellantis (STLA) said they’re partnering to develop vehicles with Amazon software in the dashboards. Stellantis will also make electric delivery vans for Amazon.
Rivian Stock: The EV Price War
Tesla and other automakers have slashed EV prices amid economic and demand concerns. On Dec. 7, reports emerged Rivian laid off around 20 members of its long-range battery cell development team, including Victor Prajapati, a former senior manager at Tesla.
Rivian has already been in cost-cutting mode to improve its competitive stance vis-a-vis other EV makers. In 2022, the company said it had paused plans to build electric commercial vans in Europe with Mercedes-Benz. Rivian stock fell 5% on the news.
CEO Scaringe has said the company is evaluating „growth opportunities“ and pursuing „the best risk-adjusted returns on our capital investments.“
„At this point in time, we believe focusing on our consumer business, as well as our existing commercial business, represent the most attractive near-term opportunities to maximize value for Rivian,“ he said in a Dec. 2022 statement.
Rivian currently has a starting price of $73,000 for its R1T electric pickup and $78,000 for the R1S SUV.
All prices are before federal tax credits. New Rivian vehicles are currently not eligible for full $7,500 EV tax credits under the Inflation Reduction Act (IRA). The company’s pickup truck and the SUV both meet the standards for $3,750 tax credit, according to the Internal Revenue Service (IRS) website.
The company hiked the price of its R1T electric pickup around 17% in March. That increased the base cost to about $78,975 from $67,500. The price of the R1S SUV jumped about 20%, bringing the new base price to about $84,000 from $70,000.
Rivian said in its third-quarter release it is continuing to „take steps to further strengthen our balance sheet as we develop our next vehicle platform, R2, and begin long lead time equipment purchases for our plant in Georgia.“
The EV startup expects to unveil new products in early 2024 with R2 platform production beginning in 2026. The R2 will be more compact and available at a lower price point.
„There’s an extreme vacuum of choice we feel in the sort of $45,000 to $50,000 price range for midsize SUVs,“ Scaringe said on the Q3 earnings call.
RIVN surged nearly 8% the day after Tesla delivered its first 12 Cybertrucks, with investor interest in EV trucks picking up. Rivian stock traded above its 50-day and 200-day moving averages after gaining more than 40% in December, according to MarketSmith analysis.
However, RIVN shares have started 2024 by tumbling more than 20%, dropping back below their 200-day and 50-day lines. The stock is currently trading about 78% below their IPO price of $78.
Rivian stock tumbled 9% on Oct. 10, 2022, after the startup recalled nearly all of its 13,000 vehicles on the road to fix a steering defect. Loosened fasteners could cause the steering controls to fail. RIVN shares also fell 9.9% on Aug. 9 after second-quarter earnings, plummeting 17% in Aug. 2023, following a three-month rally.
Rivian stock ranks tenth in IBD’s Automakers industry group. RIVN has a 39 Composite Rating out of 99. Additionally, the stock has a 33 Relative Strength Rating and its EPS Rating is 42 out of 99.
Rivian sales are picking up, but heavy losses are likely to continue for some time. Shares are down 27% in January. For now, RIVN is still not yet a buy.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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