Recent Statistics From Rivian Might Reignite Investor Interest in the EV Maker’s Stock
Recently, investor confidence in Rivian Automotive (NASDAQ: RIVN) has declined due to numerous concerns, such as lacklustre production, sluggish deliveries, rising losses, and an underwhelming outlook for 2023.
However, Rivian’s latest quarterly report suggests a glimmer of hope. There are indications in the report that show the company’s performance could have been much better this time around.
Could this mark a pivotal moment for Rivian’s stock?
Progress on the Right Path
Rivian’s Q1 report revealed several unexpected results.
Firstly, Rivian surpassed projections on both its revenue and net income. The company, which manufactures R1T pickup trucks, R1S SUVs, and last-mile electric delivery vans (EDVs), pulled in $661 million in revenue and reported a net loss of $1.35 billion, or $1.45 per share, for Q1.
Despite the sizeable losses, Rivian’s financial situation improved significantly from the same quarter of the previous year when losses were a heftier $1.77 per share. Two factors greatly influenced Rivian’s bottom line for the quarter: reductions in selling, general, and administrative expenses, as well as research and development (R&D) expenses.
While decreased R&D expenditures may raise eyebrows for an EV start-up, it’s integral to Rivian’s cash conservation strategy. The company has steadily reduced capital spending, focusing primarily on essential projects. For instance, in Q1, Rivian’s capital expenditures were a mere $283 million compared to $418 million in the corresponding quarter of the previous year.
The strategy is bearing fruit already. Rivian concluded Q1 with a cash reserve of $11.8 billion, a slight decrease from its Q4 balance of $12 billion.
Simply put, Rivian managed to narrow its losses and slow its cash burn rate during the last quarter, development investors have eagerly anticipated.
Rivian’s Strategy for 2023
Rivian’s Q1 production dipped by roughly 6% sequentially, producing just 9,395 units.
In April, Rivian announced this figure, causing market unease about the company’s ability to hit its target of 50,000 units for 2023, given the disappointing Q1 production. Some might have even anticipated the company to revise its 2023 forecast.
However, Rivian has maintained its 50,000-unit production target for the year, focusing on bolstering production levels. This commitment was evident in Q1, where production dipped slightly from Q4, even though its EDV production was mostly inactive. Rivian began using its in-house Enduro motor and lithium-iron-phosphate battery packs in EDVs in Q1 and plans to introduce them in its 400-mile R1S and R1T variants later this year.
Rivian’s 50,000-unit target implies doubling its capacity utilization, which should significantly reduce the fixed cost per vehicle if achieved. The primary goal for any EV maker is to sell each car profitably, and scaling up production is the initial step. Rivian is making strides in that direction.
Keeping a Close Eye on Rivian’s Stock
Rivian delivered what investors sought: reduced losses, slower cash burn, and a strong focus on production. The company also anticipates turning a gross profit in 2024, driven mainly by higher volumes. Additionally, Rivian expects its average selling price to rise in the coming quarters as it completes its lower-priced, pre-March 2022 orders and transitions to newer ones.
One concern, however, is that Rivian ceased reporting its backlog from the fourth quarter onwards, making it difficult to gauge the demand for its vehicles. The last reported figure was 114,000 combined preorders for the R1T and R1S as of Nov. 7, 2022, in addition to 100,000 EDV orders from e-commerce giant Amazon. On the most recent earnings call, Rivian’s CEO, RJ Scaringe, mentioned that their backlog “still extends well into 2024”. Nonetheless, the company will need more than this to flourish truly.
At this juncture, Rivian’s trajectory relies heavily on its execution, and it may be premature to label this a turning point based solely on one quarter’s performance. Observing another quarter to see if Rivian maintains its momentum before investing heavily is prudent. However, this development does warrant a closer eye on Rivian’s stock in the coming months.
