Rivian Finally Rolls Off the Production Line

In April, Ford (F) reported a multi-billion dollar loss due to a massive write-off on its stake in Rivian (RIVN).

Other prominent investors including Amazon (AMZN) and Blackrock (BLK) dealt with similar losses.

Yet, interest in the company rose, sending the search volume for the stock skyrockteting in recent days. But not necessarily for good reasons.

The company recently reported a loss of $1.7 billion in the second quarter. Yet, that may not matter.

The recent climate bill has investors excited about EVs because it includes a tax credit of $7,500 for people who buy one. There’s a huge push to go fully electric over the next 15-20 years. Which opens up a window of opportunity for EV makers. 

Rivian brought the first fully electric pickup truck to the U.S. The truck looks sleek, and it’s fast. Tesla hasn’t done that yet.

And preorders sit at nearly 200,000.

But does having a cool-looking EV truck enough for folks to justify an investment in the company’s stock? 

Check out our thoughts below as we take a deep dive into Rivian. 

Rivian’s Business

Rivian designs develop, manufactures, and sells electric vehicles. The company offers a five-passenger electric pickup truck. And plans to release an EV SUV sometime in 2023. 

RIVN has produced roughly 8K vehicles since the start of production, as of June 30, 2022. It has received roughly 98K R1 net preorders in the U.S. and Canada since June 30th, 2022, and plans to produce 25K vehicles in 2022. 

The company also received an Amazon (AMZN) order for 100K delivery vans. 

RIVN recently announced Q2 results, with revenues of $364 million, beating the streets estimates of $338 million.  

Financials

RIVN was a pre-revenue company until the Q4 2021, so it wouldn’t be fair to compare its fiscal 2021 to its fiscal 2022 performance. While we have limited data, let’s dig into what we know. 

Rivian posted revenues of $364 million vs. $337.5 million (analyst expectations). While that’s bullish, the company reported a gross loss of $704 million for the June period, which is nearly double its revenue for the quarter. 

During Q1 2022, the firm reported a net loss of $1.59 billion and revenues of $95 million. While revenues picked up in Q2, the firm also lost $1.7 billion in the quarter. 

Its GAAP net loss is $4.79 for every dollar of revenue recorded, which is far from profitable. 

While the company is burning money left, and right, they have plenty of cash. The company ended Q2 2022 with nearly $15.5 billion in cash. This is important considering its uphill battle to boost production and reach profitability. 

Valuation

Rivian’s valuation is somewhat of a joke. After all, its market cap is less than half of Ford’s currently. Rivian is on pace to produce 25k cars this year, while Ford will sell somewhere between 1.5-2.5 million. And to think, when Rivian was trading at its highs, its market cap exceeded Ford’s. 

Rivian’s price-to-sales is 104.9x, compared to NIO at 5.5x, Tesla 13x, Ford 0.43x, and GM 0.42x, and you’ll see how insanely valued Rivian is. 

Profitability

Rivian is several years away from becoming a profitable company. It may never become profitable if it continues to burn through cash the way it has. Its total return on capital is -28.2% and its return on equity is -53%

Growth

Revenues should continue to grow as the firm boosts production. However, it needs to churn out 18K cars by the end of the year to meet its 25k target goal. Projecting growth and sales is difficult, given the limited data we have on the firm’s ability to execute. However, revenues have improved from last quarter, and production has increased by 72% from last quarter. 

Our Opinion 3/10

Rivian makes some amazing trucks and SUVs. However, it’s in an ultra-competitive market, competing against Tesla, GM, Ford, and Toyota. 

The company has plenty of cash and a deal to deliver 100K vans to Amazon over the next several years. But the valuations are just insane. And there are better options if you’re an investor looking to get exposure to EV. We’d wait to see how Rivian executes over the next few quarters. But right now, this is not a stock we would be buyers of.