When Rivian Automotive (RIVN 3.23%) went public in November 2021, it claimed it may produce 50,000 electrical autos (EVs) in 2022. However final March it halved that focus on to 25,000 amid persistent provide chain constraints.
Rivian repeatedly assured buyers it may hit that decrease goal, but it surely solely produced 24,337 autos for the complete 12 months. That miss — together with a current recall, allegations of unsafe work situations, and the suspension of its EV partnership with Mercedes-Benz (MBGY.Y 1.70%) — all prompted Rivian’s inventory to stay almost 80% under its IPO value of $78.
Picture supply: Rivian Automotive.
However may Rivian’s inventory bounce again this 12 months because it resolves these rising pains? Let’s evaluation its long-term roadmap, its monetary stability, and its valuations to resolve.
Reviewing Rivian’s roadmap
Rivian produces three sorts of EVs: the R1T pickup truck, the R1S SUV, and an electrical supply van (EDV) for Amazon (AMZN 3.48%). Amazon, Rivian’s largest investor, positioned an order for 100,000 EDVs again in 2019, and it expects that whole fleet to be delivered by 2025.
There’s loads of pent-up demand for Rivian’s autos. As of Nov. 7, 2022, Rivian had acquired greater than 114,000 preorders for its R1 autos, in comparison with about 71,000 R1 preorders almost a 12 months earlier.
Rivian additionally has the capability to satisfy that demand. Its Illinois plant can already produce 150,000 autos yearly, and it expects to develop its capability to 200,000 autos this 12 months. It expects to open a second plant in Georgia in 2024 to spice up its annual manufacturing capability to about 600,000 autos. It believes it might probably produce one million autos a 12 months by 2030.
Nonetheless, Rivian’s manufacturing was repeatedly throttled by provide chain constraints all through 2022. Throughout its newest convention name final November, CFO Claire McDonough mentioned “the provision chain continues to be our largest supply of uncertainty” because it struggled with tight provides of chips and batteries. It initially tried to forge a three way partnership with Samsung to realize a steady supply of batteries, however that deal fell by in early 2022. Its subsequent shift to lithium iron phosphate (LFP) batteries, which did not require any difficult-to-mine nickel or cobalt, exacerbated these disruptions.
Rivian expects to step by step resolve is provide chain points this 12 months, however doing so would push a few of its deliberate capex for 2022 into 2023 because it ramps up its manufacturing once more. Throughout the convention name, CEO RJ Scaringe declared that Rivian’s “core focus” in 2023 could be its “continued progress in deliveries.” Rivian can also be anticipated to launch its R1X SUV — which can be sportier, pricier, and extra highly effective than its R1S SUV — by the top of 2023. The R1X will reportedly begin at $115,000, in keeping with Motortrend, in comparison with a beginning value of about $75,000 for the R1S.
Rising income and steep losses
For 2022, analysts count on Rivian to generate $1.8 billion in income however publish a whopping internet lack of $7 billion. In 2023, they count on its income to triple to about $5.3 billion and for its internet loss to slender to $6.3 billion.
Primarily based on these estimates, Rivian’s annual deliveries would possibly triple to about 75,000 this 12 months. Nonetheless, buyers ought to take these forecasts with a grain of salt, since they may simply be derailed by extra provide chain points or a worldwide recession. Rivian ended the third quarter of 2022 with a detrimental free money circulation (FCF) of $1.7 billion, but it surely was nonetheless sitting on $13.8 billion in money, money equivalents, and restricted money. So for now, Rivian can afford to burn more money because it ramps up its manufacturing — and its low debt-to-equity ratio of 0.2 ought to give it some room to lift contemporary money at cheap charges.
Rivian at the moment trades at 3.1 occasions its 2023 gross sales. Tesla (TSLA 7.90%), which is anticipated to generate greater than 20 occasions as a lot income as Rivian in 2023, trades at 3.7 occasions that forecast. Nonetheless, Chinese language EV makers like NIO (NIO 5.59%) and Li Auto (LI 4.73%) — that are delivering considerably extra autos than Rivian — each commerce at lower than 2 occasions this 12 months’s gross sales. Briefly, Rivian appears fairly valued — however not terribly low-cost but — relative to its EV friends.
Rivian’s inventory may stagnate in 2023
Rivian’s draw back potential is perhaps restricted, however I do not suppose the bulls will return till it resolves its manufacturing points, accelerates its deliveries, and rolls out the R1X. It will not go bankrupt like different struggling EV makers, but it surely additionally will not be a lovely funding so long as rising rates of interest proceed to punish unprofitable and speculative corporations. Primarily based on all these details, I imagine Rivian’s inventory will proceed to stagnate all through most of 2023.
John Mackey, former CEO of Entire Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Leo Solar has positions in Amazon.com. The Motley Idiot has positions in and recommends Amazon.com, Nio, and Tesla. The Motley Idiot has a disclosure coverage.
