Shares prices of Rivian Automotive (RIVN +1.90%) are hovering around a 52-week low after the electric truck, SUV, and delivery van manufacturer reported its first quarterly earnings as a public company.
Let's unpack the earnings report to determine what's driving Rivian's stock lower right now.
Image source: Rivian Automotive.
1. Disappointing production numbers
Rivian's goal was to produce 1,200 vehicles by the end of the year after delivering its first R1T truck in September. Unfortunately, Rivian only produced 650 R1T vehicles as of Dec. 15, and delivered 384 of them, as well as producing and delivering two R1S vehicles in mid-December. The lower-than-expected production and delivery numbers weren't a good start for Rivian, because its valuation is completely based on rapid growth to eventually achieve profitability.
2. Wider-than-expected loss
In its Q3 shareholder letter, Rivian reported that it raised a staggering $13.7 billion in gross proceeds from its November initial public offering (IPO). With only $1 million in revenue for the nine months ended Sept. 30, 2021, Rivian's spending naturally took a sizable toll on its income statement. It reported a net loss of $2.23 billion for the nine months ended Sept. 30, 2021, $1.23 billion of which came in the third quarter. The Q3 loss was in range with Rivian's previous guidance for a loss of $1.21 billion to $1.28 billion for the quarter, but worse than Wall Street's consensus estimate of a $1.04 billion loss.
3. New manufacturing plants won't be cheap
Rivian announced a $5 billion investment in a second manufacturing plant in Georgia. Construction is expected to begin next summer, with production slated for 2024. The Georgia plant will have an annual capacity of 400,000 vehicles, compared to its Illinois factory's existing production of 150,000 vehicles per year. However, Rivian is also increasing its Illinois production to 200,000 vehicles per year once it finishes expanding its R1T production line.
News that Rivian is investing in new production capacity is a bit of a mixed bag. While it does indicate that Rivian is confident in its ability to produce and deliver a lot of vehicles, it's also an extremely expensive endeavor. The cost comes on top of Rivian's existing financial obligations, not to mention the cost of building its Adventure Network of charging stations.
Some bright spots
The earnings report wasn't all bad. Rivian reported 71,000 reservations for its R1T pickup truck from the U.S. and Canada. That number comes on top of the 100,000 orders Amazon has placed for its electric delivery vans. For reference, consider that Rivian reported 48,000 R1T preorders as of Sept. 30 2021, and about 55,400 R1T and R1S preorders in the U.S. and Canada at the time of its IPO roughly six weeks ago. Putting the pieces together, it's clear that Rivian got a major jolt from all the press it has received in the last month or so. Following Tesla's direct-to-consumer model, Rivian will hopefully be able to fulfill customer demand with little to no advertising expense.
Additionally, Rivian was recently given the MotorTrend 2022 Truck of the Year award for its R1T pickup. It's yet another sign that demand for the R1T, as well as the car's technology and performance, are being well received by potential buyers and the car community.
What to do now
Rivian is just a few months into production. It also just went through the major step of going public. Given the context, its 2021 financial metrics and production numbers should be taken with a grain of salt. However, it's paramount that Rivian delivers a reputation for hitting or exceeding its goals so it can justify not just its valuation, but the cost needed to scale its manufacturing, distribution, and charging network.
Rivian's ambition is undeniable. However, it is a company that remains entirely unproven on the public stage. Until we see some meaningful milestones, such as the gap between annual production capacity and customer deliveries start to narrow, then Rivian remains a speculative play at best in the electric vehicle space.
