Start-Up Electric Vehicle Maker Rivian Plunges on Modest 2021 Production Cut

On December 16, Rivian Automotive, Inc. (NASDAQ: RIVN) reported its first quarterly earnings as a public company, and, as expected, reported de minimis revenue and an enormous 3Q 2021 operating loss and operating cash flow deficit. 

Specifically, the company posted revenue of US$1 million, a US$776 million operating loss, and a US$685 million adjusted EBITDA deficit in the quarter. Quarterly losses are expected to remain very high for many quarters as the company begins the initial production runs of its vehicles.

(in millions of U.S. dollars)3Q 20211H 2021
Revenue$1 $0 
Operating Income($776)($990)
Operating Cash Flow($685)($851)
Adjusted EBITDA($727)($955)
Capital Expenditures($469)
Cash$5,156 $3,658 
Pro Forma Cash Reflecting IPO and Debt Issuance Proceeds$19,920 
Debt and Convertible Preferred$11,085 

Two other key points of the earnings release discussed Rivian’s estimated vehicle production for the full year 2021 and the number of reservations it has received for its R1T electric pickup truck and R1S electric SUV. First, the company said it now expects to produce “a few hundred” fewer R1Ts in 2021 than the 1,200-unit goal it articulated in late October. Through December 15, Rivian produced 650 R1Ts and 2 R1S’s.

Vehicle Production and Delivery DataAs of 12-15-21As of 10-31-21As of 9-30-21
R1T Pickup Trucks:
Articulated Full-Year 2021 Goals:
     R1Ts Produced(A)1,200
     R1Ts Delivered1,000
     R1S’s Produced(A)25
     R1S’s Delivered15
     EDV’s ProducedMaybe a handful10
     EDV’s Delivered10
R1T and R1S Combined Reservations71,00055,40048,000
(A) Maybe 1,000 combined R1Ts and R1S’s.

Second, Rivian reported that as of December 15 it had about 71,000 aggregate pre-orders in the U.S. and Canada for its R1T and R1S vehicles, a significant increase from 55,400 as of October 31 and 48,000 on September 30. These reservations require a deposit of US$1,000, which is fully cancelable and fully refundable.

The stock plunged around 9% on December 17 on the fairly modest production shortfall which represents almost a “drop in the bucket” when considered versus its future manufacturing plans. Rivian projects it can reach weekly production levels of 1,310 R1T/R1S vehicles and 1,710 electric delivery vans (EDVs) at its Normal, Illinois manufacturing plant in approximately two years — which would be no small feat. The company’s annualized revenue at that time would be around US$10.5 billion. This rough sales estimate assumes about US$70,000 in revenue per vehicle.

As implied above, the December 17 stock decline would seem to be classic overreaction to modest bad news, but another larger factor could be in play. Even after this correction, Rivian, which has booked a grand total of US$1 million of revenue in its history, still carries a stock market valuation and enterprise value of about US$88 billion and US$80 billion, respectively. The correction in Rivian’s stock may also reflect investor unease about this extraordinary valuation at a time when the stock market is punishing many other very high valuation tech stocks.

Along with Lucid Group, Inc. (NASDAQ: LCID), Rivian is one of the two most highly valued electric vehicle (EV) OEM development companies. Similarly, those two companies have also generated the largest and most passionate groups of followers of their specific models and technology of all the EV OEM developers. One valuation measure which Lucid bulls have embraced is the dollar-value of its reservation “backlog.”

As of mid-November, Lucid had 17,000 or so (fully refundable) reservations for its Lucid Air model. At an average price of, say, US$90,000 per vehicle, this represents a dollar backlog of around US$1.5 billion, equivalent to about 2.5% of its ~US$60 billion enterprise value. In comparison, Rivian’s approximate US$12 billion reservation “backlog,” consisting of its 71,000 R1T/R1S reservations and Amazon’s 100,000 EDV order, constitutes about 15% of its enterprise value, implying that on this measure, Lucid trades at a substantial premium to Rivian.

Even with the December 17 share price correction, Rivian shares still look extended. After all, the company has generated almost no revenue in its history and is unlikely to generate positive cash flow for years, yet the stock market continues to assign it roughly the same stock market capitalization as GM and Ford.  

Having said that, we fully acknowledge that Rivian has a number of positive attributes.  he U.S. government is aggressively encouraging and incentivizing the adoption of EVs over conventional gasoline-powered vehicles. In addition, Rivian’s balance sheet is a fortress — a cash balance in the vicinity of US$20 billion after the IPO. Finally, its vehicles have received strong reviews and have impressive battery ranges.

Rivian Automotive, Inc. last traded at US$99.31 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.

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