Rivian Stock (NASDAQ:RIVN)
After the bell on Tuesday, Rivian (NASDAQ:RIVN) sent a letter to its shareholders with information about the fourth quarter. In 2022, the first year that the electric car company made a lot of cars, it saw good growth, but it cost a lot to move this young industry forward. The prediction for this year was not very good for investors, and it showed that Rivian stock may go back to its lowest point in public trading at some point this year.
Rivian Missed on Revenue, Beat on the Bottom Line
Rivian said that it made $663 million in the fourth quarter. Due to the very low number of sales and deliveries in the previous period, this number grew by a large percentage. Street predictions for the time period say that the company fell short by $730 million. I’ll point out that the average analyst revenue prediction hasn’t changed much since the company reported delivery in January, even though deliveries seem to be very weak. It’s possible that some old projections of income were used, which would have made the shortfall bigger than it should have been.
Rivian is having trouble right now because its costs are just too high. Even though sales went up by more than $125 million, the cost of goods sold went up even more. In Q4, the business had to pay more for inventory, pay a premium for materials, and pay more for faster shipping. The company’s gross margin% went up because it made more money, as shown in the table below.
Still, the gross margin in dollars was negative $1 billion for the fourth quarter of 2022. This was more than $80 million less than the third quarter. Even though operational costs dropped slightly from one period to the next, this wasn’t enough to keep the company’s operating loss from going up to about $1.8 billion. Even though the business’s non-GAAP loss per share of $1.73 was better than what analysts had predicted by more than 20 cents, the company lost a huge amount of money under GAAP for the third straight quarter, more than $1.7 billion.
Rivian went public with a big IPO and got a lot of money, which was good for the company. For now, this has stopped any more capital raising, but as was already said, more than $6.4 billion was spent in 2022. Operating activities made up more than $5 billion, most of which were net losses because more than $1.3 billion was spent on capital expenditures. This year, Capex is expected to go up by more than 50% compared to 2022, and the net losses aren’t likely to go away any time soon. So, even though there is no danger of bankruptcy right now, it looks like more money will be needed in the next two years.
The worst part of Tuesday’s report was the advice it gave. The management says that this year, 50,000 cars will be made. Analysts thought that total sales would almost triple to more than $5 billion, while the general public thought that there would be more than 60,000. As stated in the shareholder letter, there will be downtime in production this year to improve products and processes. The supplier chain was brought up as another problem. Rivian thinks that as production goes up, its gross margin dollar losses will go down, and eventually, it will be able to make more money than it loses. This year, the adjusted EBITDA loss should be about $900 million less than last year, but it will still be much more than $4 billion.
Since each Rivian car costs about $80,000, the company has a pretty small market. Amazon (NASDAQ:AMZN), the biggest investor in Rivian, has also bought 100,000 electric delivery vans from the company. Customers are already looking for cheaper electric cars, especially if they can use the large tax breaks that the Inflation Reduction Act offers.
On Wednesday, Tesla (NASDAQ:TSLA) will have its Investor Day, which could make things harder for Rivian. If Tesla comes out with a delivery van or other new products, Rivian may have to deal with more competition. Established companies like Ford (NYSE:F), which hoped to sell 20,000 units of its electric F-150 Lightning pick up this quarter, are also in the pickup truck market.
In after-hours trading, Rivian shares were selling for less than $18, which was a nearly 8% drop. From the company’s last earnings report, this is a loss of almost $10. That means the business has lost about $10 since its last earnings report. In the time since then, the average analyst’s price target has dropped even more, to $37 and change, which suggests a big upside. But since the outlook is worse than expected and the street valued this name at about $140 when it went public, I think that average will go down. Right now, the next new low is just $3 away.
The fourth-quarter report from Rivian, which came out on Tuesday, was not good. Even though some of the estimates from experts might have been a little out of date, the company’s sales were a little lower than expected. Even though losses were less than expected, the company that makes electric cars is still losing money and running out of cash at this low level of production. Even though management thinks that production will almost triple this year, expectations were much higher, and gross margins probably won’t get better.
I would be careful with Rivian stock in the near future because the market is getting more competitive and it may be necessary to issue more capital. If the market doesn’t hold up in the next few weeks and the Fed keeps raising rates more than the market wants, Rivian shares could easily hit a new low. This company seems to have a good growth plan for the future, but for stockholders to make money, it needs to do a better job of putting it into action and maybe offer cheaper cars right now.
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