Three separate reports have been released over the past few days which are likely to impact Rivian Automotive, Inc. (NASDAQ: RIVN) shares for some time. Two of the issues have negative implications for the electric vehicle developer, while the other discusses what could be a quite promising development.
First, Korean media is reporting that battery development partnership talks to build an exclusive cell manufacturing facility in the U.S. have ended between Rivian and Samsung SDI Company. The sticking points appear to be:
- Rivian’s position that Samsung should allow at least some of the battery-making technology be transferred to it;
- Rivian wanted to be able to inspect the interior of the factory; and
- Rivian would not guarantee it would buy a set quantity of batteries produced. It appears that Rivian could not abide by conditions one and two, and Samsung would not agree to the third stipulation.
In April 2021, Rivian and Samsung announced that Samsung would be its battery supplier. That accord apparently remains effective despite the breakdown of talks regarding a much deeper partnership.
(In October 2021, Stellantis reached an accord with Samsung which would have presumably been similar to what Rivian and Samsung were discussing. Stellantis and Samsung plan to produce battery cells and modules in the United States. Operations are targeted to begin in the first half of 2025.)
Second, Tesla, on its 4Q 2021 earnings conference call, signaled that the global chip shortage will continue to affect its business in 2022, perhaps even more so than in 2021. It seems reasonable to conclude that if this issue will be a “fundamental limiter of output” across all Tesla factories despite the car giant’s size, reach, and influence, a start-up electric vehicle maker like Rivian could be even more seriously impacted.
Third and more positively, Rivian may have already materially increased production of its R1T electric pickup truck, according to Bloomberg. Through the end of December 2021, Rivian was manufacturing about 50 trucks per week. The company appears to have paused production during the first week of January 2022 to implement a number of fixes and improvements to its production line. Those fixes seem to have worked and they may now (or soon) be churning out 200 R1T’s per week.
Rivian stock briefly touched US$50.00 on January 28, 2022, and has since bounced quite sharply to highs of $69.62. Still, the stock is down more than 60% from its mid-November US$179 high.
Make no mistake: Rivian’s valuation is still extraordinarily high. At the company’s rumored current pace of R1T and R1S electric SUV production, combined with its planned build of 10,000 electric vans for Amazon this year, Rivian’s present annual revenue run rate is perhaps US$1.5 billion-US$2 billion.
Against this, Rivian’s enterprise value (EV) is around US$50 billion. Furthermore, the company posted a US$776 million operating loss and a US$685 million adjusted EBITDA deficit in 3Q 2021. Quarterly losses are expected to remain very high for many quarters as the company begins the production runs of its vehicles.
Even for a company with bright future revenue prospects, as Rivian has, assigning an EV-to-current revenue multiple of 25x-30x seems quite generous — without considering the enormous cash flow shortfalls it faces over the next few years.
Rivian Automotive, Inc. last traded at US$66.87 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. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
