Saturday, June 25 2022

A Rivian R1T electric pickup truck during the company’s IPO outside the Nasdaq MarketSite in New York on Wednesday, November 10, 2021.

Bing Guan | Bloomberg | Getty Images

Rivian Automotive’s electric pickup trucks and SUVs are built to tackle rough terrain, but even they may struggle to handle the company’s steep 57% stock drop so far this year.

Answers about whether Rivian can turn the tide after missing 2021 production targets and reversing a controversial price increase for current reservation holders will come after markets close Thursday, when the automaker reports fourth-quarter results. quarter and its forecast for 2022.

As investors will watch last quarter’s financial results, the focus is on the company’s guidance for this year and any changes to the company’s previously announced plans amid global supply chain issues. , Russia’s invasion of Ukraine and significant increases in the cost of raw materials crucial to its EV.

Wall Street will also review Rivian’s customer reservations and progress in ramping up simultaneous production of three products at its Normal, Illinois plant. Products include electric pickups and SUVs for consumers and an electric delivery van with the first orders going to Amazon, which has a 20% stake in the EV startup.

“Accelerating a new program, not to mention three, is always a challenge, especially for a startup,” RBC Capital Markets analyst Joseph Spak said in a note to investors last week.

Spak lowered his company’s 2022 production estimate — from around 43,000 vehicles to less than 25,000 — and cut his share price target from $165 to $116 per share.

Shares of Rivian, which went public in a blockbuster IPO in November, closed Wednesday at $43.95 per share, up 4.1% on the day.

Here’s more information on Rivian’s plans and what investors need to know ahead of its fourth quarter results on Thursday after the bell:

Expect losses

Rivian is a story of growth. Like many speculative electric vehicle startups, Rivian is betting on its future, not its current finances.

Rivian is expected to post an adjusted loss per share of $1.97 in the fourth quarter on revenue of $60 million, according to estimates compiled by Refinitiv.

For the third quarter, Rivian posted an operating loss of $776 million and a net loss of $1.23 billion.

Outlook

Rivian said it plans to produce 150,000 electric vehicles by 2023. That’s going to be a tall order, given that at the end of last year the company was producing an average of around 50 vehicles a week, i.e. an annual rate of 2,600 vehicles.

Last year, the company said it expected capital expenditures of around $8 billion by the end of 2023.

BofA Securities analyst John Murphy said Rivian’s “near-term business success will be measured by orders and production trends” rather than financials.

For 2022, Refintiv consensus estimates put Rivian’s adjusted loss per share for the full year at $4.97 and revenue at around $3.16 billion.

Production issues

Shares of Rivian plunged in December after CEO Robert “RJ” Scaringe revealed the company would miss its 2021 production target due to supply chain issues as well as challenges in ramping up production of the complex batteries. that power the vehicles. Shares have been unable to recover, down 60% since then.

“Speeding up a production system like this, as I’ve said before, is a really complex orchestra,” he said in December. “We are progressing largely as planned; the battery constraint is really an artifact of having a highly automated line in place and, as I said, it presents no long-term challenges for us.”

A Rivian Amazon electric delivery van navigates the street with the Hollywood sign in the background.

Amazon

Analysts and investors will want to know if the company was able to resolve some or all of these issues.

Rivian suspended production at its Illinois plant for 10 days for fixes and process improvements, Scaringe told a Wolfe Research conference last month.

“Now of course we are reaping the benefits of some of these line improvements that have been made,” he said.

The company previously said it planned to add a second battery assembly line at its plant in early 2022.

Product costs

The rapid increase in the prices of raw materials such as nickel, a an essential ingredient in most long-range electric vehicle batteries, will likely be front and center in Rivian’s earnings call. Russia is a major global supplier of nickel, and the price of the metal has surged as investors grapple with the implications of heavy sanctions imposed following the country’s invasion of Ukraine.

Against this backdrop, Rivian last week announced steep price increases – around $12,000 – on the high-end “four-engine” versions of its R1T pickup and R1S SUV, saying the rising costs made the relocation required.

“Since our pricing structure was initially put in place, and especially in the last few months, a lot has changed,” Scaringe wrote in a letter to stakeholders on March 3. “The costs of components and materials that go into building our vehicles have increased dramatically. Everything from semiconductors to sheet metal to seats has become more expensive and with that we have seen the average price of new vehicles in the United States increase by more than 30% since 2018.”

Rivian had originally applied the price increases retroactively to vehicles ordered before March. But that plan was quickly canceled after an outcry from customers. In a letter apologizing for the move, Scaringe acknowledged the company “made a mistake” that “broken” customers’ trust in Rivian.

Reservations

Wall Street views vehicle reservations as an indicator of demand for new vehicles. This is a recent process for the automotive industry, stimulated by Tesla is taking reservations for its vehicles.

As of December 15, Rivian reported 71,000 reservations for its R1T electric pickup truck and R1S SUV, up 28.2% from 55,400 units in November. The company previously said it expected to complete those orders by the end of 2023.

It is unclear how prices in either direction have impacted bookings. Rivian said this would allow customers who canceled a pre-order after the price increase to reinstate their order with the original configuration, price and delivery time. But he kept the price higher for bookings made after March 1.

“Raising the cost significantly (~20%) on early adopters willing to take this leap of faith is not a great way to build brand equity,” RBC’s Spak said last week. “The debate will now turn into a slowdown in orders as vehicles become more expensive (~$90,000+) and invite more cross-buying.”

Beyond consumer reservations, Wall Street will monitor production and inventory of commercial vans from Rivian to Amazon. The retail giant, Rivian’s biggest player, has pre-ordered 100,000 electric vans from the start-up with delivery expected through 2025.

—CNBC John Rosevear and Michael Bloom contributed to this report.

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