Rivian Automotive (NASDAQ: RIVN) posted its second-quarter earnings report on Aug. 8. The electric pickup truck, SUV, and delivery van maker more than tripled its revenue year over year to $1.12 billion, which surpassed analysts’ estimates by $110 million. It narrowed its net loss from $1.71 billion to $1.2 billion, which trickled down to an adjusted net loss of $1.08 per share and cleared the consensus forecast by $0.31.
Rivian’s headline numbers were impressive, but its stock only rose slightly after the report and remains nearly 70% below its initial public offering (IPO) price. So is it the right time to buy Rivian as a turnaround play on the electric vehicle (EV) market?
Rivian is still on track to produce over 50,000 vehicles this year
Rivian produces three types of vehicles: the R1T pickup truck, the R1S SUV, and a custom electric delivery van (EDV) for its top investor, Amazon. Rivian plans to deliver 100,000 EDVs to Amazon by 2030.
When Rivian went public in November 2021, it claimed it could produce 50,000 vehicles in 2022. But it subsequently halved that target to 25,000 vehicles as it grappled with the persistent supply chain challenges, and it ended up only producing 24,337 vehicles and delivering 20,332 of them in 2022. Those ongoing production issues drove away the bulls.
At the end of 2022, Rivian set a target for producing 50,000 vehicles in 2023 — but that still missed Wall Street’s estimate of 62,000 vehicles. However, several reports claimed Rivian was still privately aiming to produce 62,000 vehicles this year.
In the first quarter of 2023, Rivian produced 9,395 vehicles and delivered 7,946 vehicles. In the second quarter, it produced 13,992 vehicles and delivered 12,640 vehicles. That brings its year-to-date total to 23,387 vehicles produced.
That’s only half of its original target of 50,000 vehicles, but Rivian also raised its full-year production target to 52,000 vehicles during its second-quarter report. It attributed that rosier outlook to the ramp-up of its in-house Enduro drive unit — which reduces its dependence on third-party powertrains, streamlines its own supply chain, and reduces its production costs.
In the second half of 2023, Rivian will likely launch its 400-mile “max pack” batteries for the R1S and R1T, as well as the R1X SUV. To support the production of those new batteries and vehicles, Rivian will expand the annual production capacity of its Illinois plant from 150,000 to 200,000 vehicles this year. It also plans to open its second plant in Georgia next year to further expand its annual production capacity to 600,000 vehicles.
A closer look at the key numbers
Rivian is still deeply unprofitable, but its revenue is still rising as it narrows its operating and net losses. As the following chart illustrates, its total revenue is also rising at a much faster rate than its total expenses.
For the full year, Rivian reduced its capital expenditure guidance from $2 billion to $1.7 billion. It attributes that lower spending to easing supply chain constraints, its production of Enduro-powered vehicles, and its improving scale. It also raised its full-year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance from a loss of $4.3 billion to a loss of $4.2 billion — which would represent a $1 billion improvement from its adjusted EBITDA loss of $5.2 billion in 2022.
Analysts expect Rivian to generate $4.1 billion in revenue this year with an adjusted EBITDA loss of $4.2 billion. Based on those estimates and Rivian’s enterprise value of $18.7 billion, Rivian’s stock still seems reasonably valued at less than 5 times this year’s sales. For reference, the luxury EV maker Lucid Group — which only expects to produce about 10,000 vehicles this year — still trades at 17 times this year’s sales.
That’s probably why Amazon didn’t liquidate its stake in Rivian, even as Rivian’s plummeting stock price caused Amazon to post an ugly net loss last year. Rivian also ended the second quarter with $11.3 billion in liquidity (including $10.2 billion in cash, cash equivalents, and short-term investments), so it’s still in much better shape than other smaller EV makers — like Nikola or Canoo — which are struggling to stay afloat in this challenging market.
Based on these facts, I believe Rivian is still one of the best EV stocks you can buy right now. It might remain under pressure as long as interest rates stay elevated, but it could have a lot more upside potential than Tesla or other larger EV players.
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