Rivian stock surges on earnings and guidance – Time to buy RIVN?

• Rivian stock bounces as earnings are met with relief.
• RIVN earnings are in line and production guidance is maintained.
• Rivian stock trades up 2% after hours.

Rivian (RIVN) released earnings after the close on Wednesday, and the stock was primed for the bad news. RIVN had closed down nearly 10% on Wednesday as equities suffered and high growth names yet again took a huge hit. Rivian closed the regular session at $20.60 for a loss of 9.6%.

Rivian Stock News

Investors were understandably nervous then, but Rivian managed to soothe those fears with earnings. Earnings per share beat estimates, $-1.43 versus $-1.44. Revenue was $95 million versus the $135 million forecast. However, what really caught the eye was the reaffirming of production targets for 2022. A reduction of these targets during the last earnings call had really caused Rivian stock to sell off sharply, so this time it was a welcome relief. Rivian said it will deliver 25,000 vehicles in 2022. So far the company has delivered 1,227 vehicles. We are now nearly halfway through the year, and the company has reiterated a 25,000-unit delivery target. That is going to be quite some ramp-up in production then. Seems highly unlikely.

Rivian produced slightly more, 2,553, but they only delivered 1,227. You usually get paid for deliveries, not for production. The company has a decent cash pile, but it is burning through it quickly. It is losing nearly $5 billion annually and expects capital expenditure of nearly $3 billion this year. Credit is now in short supply and getting shorter. 

"In addition, we are reaffirming our 2022 adjusted EBITDA guidance of negative $4.75 billion and capital expenditure guidance of $2.6 billion. Our outlook does not assume a material change in the overall operating environment," said CFO Claire McDonough. It is quite some statement to make – outlook does not assume a change in the operating environment – when it is changing right now before our very eyes. 

We also had a question on the conference call from John Murphy, Bank of American Analyst, he did some rough math and came up with a quarterly production number of 4,000. "So, it seems like you are on pace to hit at least, at least in our model, 4,000 units plus in the second quarter. Is that kind of reasoning about correct?"  CEO RJ Scaringe replied, "that's about the right way to look at it". Hmmm, 4,000 per quarter makes in my math 16,000 vehicles then, not 25,000. The CEO did add they were ramping up production but also worryingly said, "The plant has been able to outproduce our supply chain." Hmm, are supply chains very stable at the moment? Uh oh, trouble ahead methinks.

Rivian Stock Forecast

Added to what I have outlined below, the lock-up period has now expired for IPO investors in Rivian. Already we have had Ford (F) selling some of its stake and Norges Bank, only the world's largest sovereign fund, just dumped its entire stake. Credit is tightening, and investors are sitting on a loss. They are dumping the stock, which is not exactly reassuring. Norges Bank is very diligent in their holdings – they top-sliced Tesla, selling nearly 1.3 million shares.

The market has totally changed, and companies with high capital expenditures and high cash demands will struggle. This is exactly what happened after the 2008 crisis. Cash is king, if you need it now, you have to pay dearly for it. Mizuho just put out an $80 price target on Rivian. Wedbush put out a buy rating with a $30 target. For those of you bullish, maybe you can cling onto that. For the rest of us, it is time to move on and look for other opportunities. Mizuho was one of the bookrunners to the Rivian IPO, and Wedbush was a co-manager on the deal, but there were many.

Rivian (RIVN) stock chart, daily