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Rivian's First Earnings Report Looks Like Tesla's Early Days, But Here's What's Different

By Rhian Hunt – Dec 27, 2021 at 5:10AM

Key Points

  • Rivian is generating negligible revenue, though it has lots of cash from its IPO.
  • Its position somewhat resembles Tesla’s shortly after the latter went public.
  • Rivian is operating in a much different market than Tesla at its public launch and may have other factors working against it.

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The electric pickup maker made just $1 million in revenue but has an over $100 billion market cap.

On Dec. 16, high-end electric pickup and SUV maker Rivian Automotive (RIVN 1.39%) reported its first-ever quarterly results since going public through its recent IPO. The company delivered 11 electric vehicles (EVs) in total during the third quarter of 2021, bringing in approximately $1 million in revenue. Meanwhile, its market capitalization (market cap) was a princely $100 billion at the time of the quarterly release. Overall, the company looks a lot like Tesla (TSLA 1.80%) shortly after it went public, but there are some key differences sounding a note of caution.

A pair of Rivian R1T electric pickup trucks one orange and the other brown, in front of pine trees and a distant mountain ridge under a partly cloudy sky.

Image source: Rivian.

Rivian is a mirror of Tesla in some ways

Once investors got a look at Rivian's Q3 earnings report, its share price dropped sharply, bringing its market cap down from $100 billion to a pre-Christmas level of $88 billion. Some analysts have been looking at Rivian's current position and arguing that it's quite similar to Tesla's at the start of its own upward climb. That was when Elon Musk's company also had scant revenue and little more than a few vehicle models and projections of future production to give it stock market traction.

According to Rivian management's letter to shareholders, the company earned just $1 million in revenue during the three months ending on Sept. 30. Its net loss for the period was $1.23 billion, though $458 million of this was a net loss due to convertible notes. This led to a $12.21 net loss per share, far worse than Wall Street analyst consensus predictions of a $6.68 loss per share. Omitting the convertible notes, the company's quarterly net loss was $776 million.

While current production is only a handful of vehicles, Rivian is looking to the future as a cause for optimism. It ended the quarter with $5.2 billion in cash; together with the net proceeds from its $13.7 billion in gross IPO proceeds and other, smaller funding sources, says it has around $19.9 billion to work with in achieving its goals. Those goals include boosting its Illinois factory's manufacturing capacity from 150,000 to 200,000 vehicles annually, along with building a second factory in Georgia with a 400,000-vehicle manufacturing capacity, to begin operating in 2024.

These metrics and goals appear attractive, but at this point, they are mostly speculation. Rivian has 71,000 pre-orders for its R1T pickup truck, but it only has a tiny handful of vehicles actually on the road. Going from producing 11 vehicles in a quarter to, theoretically, 150,000 per quarter (based on Rivian's factory estimates) in just three years is a steep challenge even with around $20 billion available to fund it. While the sum is almost two-thirds of the amount automotive giant Ford (F 1.34%) is spending on its own EV production, the Blue Oval has been an established automaker for over a century, giving it deep levels of knowledge on mass production and immense resources of machinery, technical staff, and name recognition among consumers around the globe.

Rivian may also have lost Ford's technical assistance after the latter decided to "go it alone" on its EV program in November, canceling its joint EV production plans with Rivian. Another serious roadblock Rivian will have to overcome is the very different environment it faces as an EV start-up compared to Tesla a decade ago.

Where Rivian's road forks away from Tesla's

While Rivian's current metrics look rather like Tesla's early days except for its massive valuation, it isn't operating in the same environment. Though hybrid vehicles existed well before it, and EVs had been tried, Tesla was a groundbreaking enterprise, the first of its kind.

Rivian is operating in a very different world. Tesla itself is now a dominating force with a market cap above $1 trillion, manufacturing around a million very popular EVs per year. Ford recently stopped accepting reservations for its upcoming F-150 Lightning electric pickup at 200,000 trucks because production couldn't keep up with demand. It's also building $30 billion worth of EV and EV battery facilities by 2025 for a massive manufacturing expansion.

Chinese EV manufacturer Nio (NIO 0.25%) just unveiled a mid-sized electric sedan, the ET5, capable of challenging the Tesla Model S Plaid on range and features, and it plans to expand into 25 countries over the next few years. It's also now consistently building more than 10,000 vehicles per month. Just about every major automaker in the world is in the process of rolling out electric vehicles, and there are many other dedicated EV start-ups to contend with, too.

In short, while Rivian resembles early Tesla, Tesla was operating with close-to-zero serious competition, giving it much more leeway as a pioneer. Rivian, by contrast, is trying to break into an EV market already crowded with successful rivals, who are busy expanding production into the hundreds of thousands and then millions, while Rivian is still trying to get its first few vehicles sold.

On the plus side, Rivian does at least produce working vehicles and has preorders for 71,000 R1T pickup trucks. Retail titan Amazon (AMZN 0.64%) is working with it to buy a potential 100,000 delivery vans. Actually producing these vehicles could be a problem, however, considering that Ford may no longer be a manufacturing partner. In a recent CNBC interview, Ford CEO Jim Farley said Ford is considering selling its 12% stake in Rivian once lock-up expires, gaining billions it can return to shareholders or invest in its own rapidly accelerating EV push.

Buy Rivian now, or await a lower entry point?

Orders and sheer market enthusiasm for all EV stocks are arguably the two main factors holding Rivian's share price relatively high right now. Nevertheless, in my opinion, the hurdles and risks it faces in maintaining or growing this valuation are quite high. The challenges of ramping up production (possibly without Ford's know-how and assistance), the numerous powerful competitors it faces, and the likelihood Ford will sell its Rivian stake, make me skeptical it will maintain its current stock value much longer.

Rivian may become a viable electric car stock long-term, but it seems likely to shed a lot of its current soaring valuation in the meantime. This scenario makes waiting for a much lower share price as an entry point a strategy at least worth considering.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon, NIO Inc., and Tesla. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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