Electric car manufacturer Rivian Automotive attracted investors’ attention in a short period. Despite the volatility in the electric vehicle market and the recent drop in Rivian’s stock, the company could be a “Buy” option for investors willing to tolerate short-term uncertainty.
While Tesla experienced difficulties in the third quarter and faced challenges in the sector, Rivian exceeded expectations in deliveries and has shown improvements in its production. It highlights that the company is making progress in areas crucial to its long-term success, such as expanding production, reducing costs, and investing in next-generation technologies.
Although down 51% from its 52-week high, Wall Street retains positive sentiment regarding the company’s long-term prospects. Rivian continues to increase production and boost sales while maintaining the robustness of its financial position, which has left a favorable impression on analysts, who believe the company has significant upside potential.
Key parts of the improvement
Rivian, a company dedicated to the manufacture and sale of electric vehicles and accessories, has been making significant efforts to compete with electric vehicle market giant Tesla and contribute to the creation of a more sustainable automotive future.
In the second quarter, the company delivered an impressive 12,640 vehicles, a marked increase compared to the 4,467 delivered in the previous quarter. This increase in production translated into a 208% increase in total revenue to $1.12 billion. In addition, a reduction in losses was evident, with a net loss of $1.2 billion in the second quarter, compared to $1.7 billion in the previous quarter.
In the third quarter of 2023, Rivian exceeded its figures by manufacturing 16,304 vehicles and delivering 15,564, which represented a remarkable 137% growth in vehicles delivered compared to the same period last year. The company is projecting third-quarter revenues ranging from $1.29 billion to $1.33 billion, marking a significant increase from the previous quarter’s $540 million. Rivian also remains confident of achieving an annual production of 52,000 units based on its previous estimates.
In addition to these achievements, Rivian is the provider of a fleet of 10,000 electric vans to Amazon, as part of the e-commerce giant’s climate commitment to achieve net zero carbon emissions by 2040.
Also, Rivian is in talks with Amazon to renegotiate its exclusivity contract and allow the sale of its cars to other companies. These vehicles operate in more than 1,800 U.S. cities and benefit from a charging network supported by 12,000 chargers at 100 delivery stations across the country.
However, Amazon is not limited to Rivian and employs a variety of more than 15 models of electric vehicles, including cargo bikes and electric buggies. “Amazon is also investing in solutions like green hydrogen and other alternative fuel methods, such as ultra-low carbon electrofuels, for our delivery and operations,” the company notes on its website.
Rivian’s capital positioning
During the third quarter, Rivian is expected to have about $9.1 billion in cash and equivalents, down from $10.2 billion in the second quarter. While this raises some concerns, the company maintains that this liquidity is sufficient to support its operations through 2025.
Nevertheless, Rivian recently announced its intention to raise $1.5 billion through green convertible senior notes due 2030, which has unsettled investors due to the potential dilution of existing shares.
To allay concerns, Rivian CEO RJ Scaringe stated that this bond issue does not reflect a lack of confidence in the company’s financial health, but rather a strategy to strengthen its balance sheet and be prepared for near-term growth.
Analysts also maintain an optimistic outlook on the company’s future, citing solid execution and a strong projected third quarter as positives. However, the competitive electric vehicle market presents challenges, and Rivian will need to differentiate itself from its competitors and generate sustained profits.
As electric vehicle market revenues continue to grow, at a compound annual rate of 10.1%, reaching $907 billion in 2028 according to Statista, Rivian needs to remain competitive. Analysts expect revenue of $1.31 billion in the third quarter but also forecast a loss per share of $1.34. The company is looking to balance its financials and is anticipating a significant increase in 2023 revenue, with a projection of $4.3 billion and a loss per share of $4.91.
Looking ahead, Rivian is expected to continue to grow revenue, reaching $6.86 billion in 2024 and reducing loss per share to $3.15. Despite these growth projections, Rivian’s stock trades at 2.5 times forward sales, raising questions about its current market valuation given the competition and the challenge of maintaining steady revenue growth.
Is Rivian stock a good option?
According to Wall Street analysts, Rivian is mostly considered a “Moderate Buy”, backed by 14 buy, six hold, and one sell recommendations in the past three months. The company’s stock’s average price target is $28.75, suggesting a 72% upside potential over the next year.
Despite intense competition in the electric vehicle market and uncertainty about Rivian’s future, its remarkable production and sales efforts along with its fair valuation and promising growth prospects have generated optimism shared with Wall Street.
Time will tell if Rivian can consolidate its position in this crowded industry. Do you think it will be able to compete with a giant like Tesla?
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(Information in this post is for general informational purposes only. It cannot and should not be considered as suggestions or recommendations regarding investing or financial decisions.)
