Rivian Reports Disappointing Quarter; Nevertheless, It May be Time to Cover Shorts
If there were a blueprint for how to put together a disappointing earnings report, Rivian Automotive, Inc. (NASDAQ: RIVN) followed it with its 4Q 2021 release on March 10. The company announced a large 4Q 2021 loss and cash flow shortfall, but investors tend to ignore such losses early on during an electric vehicle (EV) OEM’s start-up process. The most disappointing aspects of the company’s earnings release are lighter than expected production rates through the first ten weeks of 1Q 2022 and weak full-year 2022 vehicle production guidance, as well as a massive projected 2022 cash burn rate.
From January 1 through March 10 of 2022, Rivian produced 1,410 vehicles, or roughly 165 per week, even after allowing for a planned ten-day shutdown early in 1Q 2022 to “fine-tune” its production lines. In late 2021, Rivian had projected it could reach a combined 3,000 per-week electric vehicle/electric delivery van production rate at its Normal, Illinois manufacturing facility by year-end 2023. Achieving such a rate seems increasing unlikely based on current manufacturing results.
For the full year 2022, Rivian management expects to produce 25,000 aggregate R1T pickup trucks, R1S SUVs and electric delivery vans. Absent supply chain issues, Rivian believes it could have manufactured 50,000 vehicles this year.
Reservations for the R1T and R1S models combined reached 83,000 as of March 8, 2022 versus around 71,000 on December 15, 2021, and 48,000 on September 30, 2021. The pace of reservations has deviated little since Rivian management’s late February/early March vacillations about pricing decisions for the R1T and R1S models.
| Vehicle Production and Delivery Data | As of 3-8-22 | As of 12-15-21 | As of 10-31-21 | As of 9-30-21 |
| R1T Pickup Trucks: | ||||
| Produced | 650 | 180 | 12 | |
| Delivered | 384 | 156 | 11 | |
| R1S SUVs: | ||||
| Produced | 2 | 0 | ||
| Delivered | 2 | 0 | ||
| Total Vehicles Produced Since Inception | 2,425 | 652 | ||
| R1T and R1S Combined Reservations | 83,000 | 71,000 | 55,400 | 48,000 |
Based on a 25,000 vehicle production pace, Rivian expects its adjusted EBITDA will be negative US$4.75 billion in 2022. This massive prospective loss makes Rivian difficult to value.
| (in millions of U.S. dollars) | Full Year 2022E | 1Q 2022 | 4Q 2021 | 3Q 2021 | 1H 2021 |
| Revenue | $54 | $1 | $0 | ||
| Operating Income | ($2,454) | ($776) | ($990) | ||
| Operating Cash Flow | ($1,086) | ($685) | ($851) | ||
| Adjusted EBITDA | ($4,750) | ($1,108) | ($727) | ($955) | |
| Capital Expenditures | ($2,600) | ($455) | ($469) | ||
| Cash | $18,133 | $5,156 | $3,658 | ||
| Pro Forma Cash Reflecting IPO and Debt Issuance Proceeds | $19,920 | ||||
| Debt and Convertible Preferred | $1,533 | $11,085 | |||
| Number of Vehicles Produced (A) | 25,000 | 1,410 | 1,003 | 12 | |
| Number of Vehicles Delivered | 909 | 11 |
However, on the basis of projected revenue, Rivian’s valuation is robust, but not outrageous, given how other EV makers like Lucid are trading in the market. Specifically, if the 25,000 vehicles which Rivian plans to sell in 2022 were to carry an average sales price of US$90,000, its revenue could be about US$2.25 billion. Set against its enterprise value of about US$16 billion, Rivian trades at a fairly reasonable enterprise value-to-2022E revenue ratio of about 7x.
As a result, it would seem prudent for Rivian short sellers to begin to cover. The stock is down 80% from the frothy US$180 level at which it briefly traded in the mid-November 2021 aftermath of its successful IPO. Given the magnitude of this decline and Rivian’s fairly reasonable revenue valuation, it would not seem prudent to expect much more downside in the shares.
Rivian Automotive, Inc. last traded at US$38.05 on the NASDAQ.
Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Views expressed within are solely that of the author. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
