Shareholders of electric car-maker Rivian (NASDAQ: RIVN) must be wondering, “Where did it all go so wrong?” Since the stock made its debut on the markets in November 2021, it reached a high of $179.47 in the same month. It then steadily continued to drop month-over-month and closed March 11, 2022 at just $38.05. For context, its IPO issue price was $78.
To put in context, mid-November, Rivian’s market cap was around $152 billion. Today, it is around $33.6 billion.
The company’s latest earnings report, for Q4 of 2021, was disappointing. Total revenues for the quarter came in at $54 million as it delivered 909 vehicles. For fiscal year 2021, it delivered 920 vehicles, allowing it to report $55 million in revenue. Analysts expected $60 million in revenue for Q4 2021.
It posted a Q4 net loss of $2.46 billion, compared with a loss of $353 million in the year-ago period.
Investors expect Rivian to endure a tough 2022
During its earnings call, Rivian confirmed it built 1,410 vehicles this year, as of March 8, 2022. However, it also informed investors supply-chain constraints will impact production outlook in 2022.
“As we continue to ramp up our manufacturing facility, manage supply chain challenges, face continued inflationary pressures and minimize price increases to customers in the near term, we expect to recognize negative gross margins throughout 2022,” the company shareholder letter said.
The letter added, “…due to the supply chain constraints currently visible to us, we believe we will have sufficient parts and materials to produce 25,000 vehicles across our R1 and RCV platforms in 2022.”
Perhaps, its largest vendor Amazon (NASDAQ: AMZN), who is also an investor in Rivian along with Ford (NYSE: F) foresaw the signs and took steps to address it early in January 2022. Amazon also announced that it will collaborate with rival electric vehicle maker Stellantis.
Amazon already has a deal with Rivian for 100,000 vehicles to be delivered by 2030. In an investor note published in January, Morgan Stanley’s (NYSE: MS) automobile analyst Adam Jonas expalined, “The gut-check of having partner AMZN exercise its right to secure EDVs from alternative vendors (Stellantis, Daimler) has shaken investor confidence.”
After its disappointing Q4 numbers, Wedbush Managing Director of Equity Research Dan Ives, wrote in a note, "Since its IPO in late 2021 the Rivian story has been a bad episode out of the Twilight Zone for the Street.”
"The company missed their first quarter out of the box on supply chain issues 'surprises,' then instituted a 20% price unit increase due to inflationary pressures which was then taken back 48 hours later by management after a slew of customer cancellations, and last night added to the pain with very soft unit guidance for 2022."
Is Rivian stock a buy?
That said, Ives is still positive on Rivian stock and believes that its problems are ‘fixable’. His note emphasized, “At this point, we are taking a glass half full approach expecting the company to fix this nightmare situation and emerge a stronger company into the second half of 2022 and 2023 and fulfill its potential with the valuation stabilizing as the company hits its key targets."
Ives has cut his target price for the company from $130 to $60 which is a potential upside of almost 58% from its March 8 closing price.
Customers for Rivian’s cars continue to increase. As of March 8, 2022, it had around 83,000 R1 net preorders in the US and Canada. This figure was around 71,000 in mid-December 2021.
Rivian added that it continues to explore ways to “further expand our commercial partnership with Amazon.”
Adam Jonas of Morgan Stanley forecasts Rivian’s total revenues to grow at 34% CAGR (compounded annual growth rate) from 2025 to 2030. It is definitely a buy for the long-term. If only it can get through 2022.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
