While Rivian Automotive, Inc. (NASDAQ: RIVN) is currently seeing good Q2 performance after exceeding its estimated Q2 deliveries and signing an agreement with Tesla (NASDAQ: TSLA) to use its charging network. However, RIVN stock may be currently overvalued compared to other EV stocks following its 17% run after Tesla (NASDAQ: TSLA) started a rally in the EV market on its record Q2 deliveries. Given the tough competition RIVN is witnessing and its poor margins, investors could find RIVN stock a profitable short play.
RIVN Stock News
In its Q4 earnings call, RIVN stated that it aims to produce 50,000 vehicles in 2022, but the company is still suffering from supply chain and capital issues which might be the reason for the company’s underwhelming production numbers in Q1 2023. However, the company is trying to raise its cash intake by revisiting the terms of its EV trucks exclusivity agreement with Amazon.com, Inc. (NASDAQ: AMZN) to bring in more customers.
EV Stocks Survivor
As of now, the EV stocks market overall is looking bearish, thanks to the biggest name in the industry Tesla, Inc. (NASDAQ: TSLA) stock price dropping following its Q1 earnings results. TSLA barely met analysts’ expectations due to raw material, commodity, logistics, warranty costs, and lowered revenues according to the company.
But the nail in the coffin was Elon Musk’s statement regarding the EV market’s uncertainty due to the current economic environment.
Inflation and the likelihood of a recession are affecting consumers’ discretionary spending – something that impacts all EV companies, not just TSLA. While Tesla is attempting to weather the storm by cutting its vehicle prices at the start of the year in an attempt to attract more customers, this environment will put pressure on EV startups like RIVN.
Unlike Tesla, RIVN increased its vehicle prices during 2022 and faces competition from the likes of Polestar Automotive Holding UK PLC (NASDAQ: PSNY), NIO Inc. (NYSE: NIO), Lucid Group, Inc. (LCID) and Mullen Automotive, Inc.(NASDAQ: MULN). The question on some investors’ minds right now is which of the EV stocks could survive.
Compared to PSNY, the company has been narrowing its losses after reporting a decrease in its net loss YoY from $1 billion to $465.8 million while RIVN’s losses widened from $4.6 billion to $6.7 billion. Additionally, RIVN is lagging in delivery numbers. RIVN delivered 20,332 vehicles to customers while Polestar delivered around 51,500 in 2022.
Despite these figures, RIVN stock is trading at nearly three times the price of PSNY indicating that RIVN could still be overvalued. Compared with another competitor RIVN’s delivery numbers are also falling behind that of NIO with NIO delivering 122,486 vehicles in 2022 – more than 5 times those delivered by RIVN – yet NIO’s stock is trading at nearly two-thirds the price of RIVN. This further indicates the possibility of RIVN being overvalued in contrast to other EV stocks.
Production and Capital Issues
Aiming to increase its production numbers by 105%, RIVN is expecting to produce 50,000 vehicles in 2023 and build a second plant to start producing a new series of vehicles for release in 2026.
However, as a result of supply chain disruptions, RIVN still faces a great deal of production issues, especially due to the everlasting semiconductor shortage.
Digging into RIVN’s Q1 2023 vehicle production and delivery numbers, the company’s production has declined in contrast to Q4 2022. RIVN produced 10,020 vehicles and delivered 8,054 vehicles in Q4 2022 while producing 9,395 vehicles and delivering 7,946 vehicles in Q1 2023. This QoQ decrease indicates that these supply chain issues could continue to impact production – ultimately affecting its sales and raising concerns about the company’s capital.
This is not a good sign for a company burning through cash. In 2022 alone, RIVN spent $6.6 billion and after reporting a decrease in its cash position from $13.2 billion in Q3 2022 to $11.5 billion in Q4 2022, at this rate, it will have to raise capital in the future. Raising capital could dilute current shareholders, but with a cash runway of roughly 2.5 years based on its current expenditures dilution could still be a ways off. Additionally, its need to raise capital could be offset by revenue if it is able to pick up production during this time.
Amazon Exclusivity Deal
On this note, RIVN is attempting to raise its cash intake by seeking to adjust its exclusivity agreement with Amazon.com, Inc. (NASDAQ: AMZN). In 2019 RIVN made a deal with AMZN to exclusively deliver up to 100,000 EV delivery trucks over the next 4 years, obligating AMZN to purchase at least 10,000 trucks per year.
Meaning RIVN cannot sell its trucks to any other company even though AMZN has barely ordered over 10,000 vehicles. While Amazon’s lack of enthusiasm for RIVN’s product is a bearish sign, loosening its deal with AMZN could help RIVN attract more customers and potentially secure more orders.
RIVN Stock Price Targets
Considering the bearish outlook, it is not surprising that analysts at The Royal Bank of Canada Capital Markets halved their price target for RIVN – cutting it to $14 and dropping its rating from outperform to sector perform. Moreover, Alexander Potter from Piper Sandler reduced his price target by 76% from $63 to $15. With RIVN’s net loss increasing YoY from $4.6 billion to $6.7 billion, these price cuts are hardly an overreaction, but investors may be wondering if there is more downside for the stock price.
Losing Eligibility for Tax Credits
Some investors got their answer after the Treasury Department released its long-anticipated battery guidance for federal EV tax credits. As a result of rules mandating that a certain amount of battery materials be sourced in the US, RIVN’s vehicles are no longer eligible for $7,500 tax credits. While they still qualify for half this amount, these rulings could affect demand moving forward.
RIVN Stock Q1 Earnings
RIVN is to report its Q1 earnings on May 9th after hours, where analysts expect the company to report revenue of $656.6 and an EPS of -1.61
*Updated July 4th, 2023
Exceeding Expectations
Although RIVN is currently seeing a decent Q2 in terms of deliveries, it still has a long way to go to prove that this will not be a one-time thing. RIVN produced almost 14,000 vehicles in Q2 putting it on track to achieve its 50,000 production target for the year. Also, RIVN delivered 12,460 vehicles, 10% more than the forecasted 11,300 deliveries, which may see it exceed its forecasted revenue for Q2.
Furthermore, RIVN may see increased deliveries in 2024 thanks to its agreement with Tesla to provide RIVN drivers access to Tesla’s charging network starting in 2024. The new agreement will increase RIVN’s coverage in the US which can increase demand since one of the biggest concerns for new EV customers is network coverage.
Market Overreaction
With Tesla’s record Q2 deliveries, a strong rally in the electric vehicle market started. While RIVN’s positive Q2 deliveries improved the stock’s outlook, Tesla’s record Q2 deliveries were a major reason for the 17% run. The combination of the two events created the perfect storm for RIVN stock, which may have led to the market overreacting resulting in RIVN stock’s recent run.
Compared to Polestar (NASDAQ: PSNY), which expects to produce 80,000 vehicles in 2023, 60% more than RIVN’s production target, Polestar also has a far better gross margin of 3% compared to -80% for RIVN, which means that RIVN is losing money on every vehicle it sells.
Furthermore, Polestar is closer to profitability than RIVN since it reported a net loss of $9 million only in Q1 2023 compared to RIVN’s $1.3 billion net loss. With all of that combined, it is hard not to see RIVN stock as overvalued compared to other EV stocks since RIVN’s current market cap of $18 billion is more than double that of Polestar. For this reason, investors could find better opportunities in other EV manufacturers than RIVN.
Another reason RIVN’s prospects may not be as bright as investors believe is the competition the company is facing from more established manufacturers in the electric truck market – namely General Motors (NYSE: GM) and Ford (NYSE: F). With this in mind, Ford has already released an electric version of the Ford F-150, the best-selling truck in the US. In this way, it might be harder for RIVN to take hold of the market, since customers are more likely to choose more reliable and familiar names if they chose to transition to an electrical truck.
RIVN Stock Financials
2022 Annual Report
In its 2022 annual report, RIVN reported $17.8 billion in assets, including $11.5 billion in cash. RIVN witnessed a decline in assets from $22.2 billion including $18.1 billion in cash in 2021. RIVN’s liabilities grew YoY from $2.7 billion to $4 billion as its current liabilities increased from $1.3 billion to $2.4 billion. Additionally, the company’s long-term debt slightly increased YoY from $1.226 billion to $1.231 billion.
RIVN revenues grew YoY from $55 million to $1.6 billion, however, its gross loss widened from $465 million to $3.1 billion due to an increase in its cost of revenues from $520 million to $4.7 billion. Finally, the company’s operating losses increased YoY from $4.2 billion to $6.8 billion and its net losses increased from $4.6 billion to $6.7 billion.
Q1 2023 Earnings
In its Q1 2023 report, RIVN’s assets increased 1.5% QoQ from $17.8 billion to $18.1 billion, while its cash and cash equivalents decreased 2.7% QoQ from $11.5 billion to $11.2 billion. RIVN’s total liabilities increased by 35% QoQ from $4 billion to $5.4 billion.
Revenue has increased 695% YoY from $95 million to $661 million. Operating costs decreased more than 16% from $1,077 million to $898 million, which contributed to the operating loss decrease of 15% YoY from $1.58 billion to $1.34 billion. In this way, RIVN reported a net loss of $1.3 billion – a 15% increase YoY.
Media Sentiment
@EricJhonsa believes that RIVN beating its delivery estimates is not enough to be bullish on the stock.
Despite the company’s several red flags, @FinJourney believes RIVN still has room to run.
Technical Analysis
RIVN stock’s trend is neutral with the stock trading in a sideways channel between $15.78 and $13.31. Looking at the indicators, the stock is trading above the 200, 50, and 21 MAs which are bullish indications. Meanwhile, the RSI is extremely overbought at 94.8 and the MACD is bullish. It is worth noting that the stock has broken its $15.78 resistance leaving behind a gap near $16.7 which may be filled in the future.
As for the fundamentals, RIVN stock just witnessed a catalyst in its Q2 deliveries exceeding analysts’ expectations. Despite this, RIVN could be overvalued at current levels given its fundamentals which could see the stock drop and test the $13 support level – filling the gap on the chart in the process – especially with the RSI extremely overbought at the moment.
RIVN Stock Forecast
It is undeniable that RIVN is having a great quarter, with it exceeding its delivery target for Q2 and being on track to achieve its 2023 production target. That said, RIVN stock may be trading at a premium compared to other EV stocks since its market cap is more than double that of Polestar, which is currently outperforming RIVN in many areas. Furthermore, RIVN may find difficulty growing its market share since it faces tough competition from companies like Ford and General Motors. All of that makes RIVN stock overvalued and may be due to a correction soon – making it a potentially profitable short play.
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