Rivian Automotive (RIVN -3.62%) has disappointed a lot of investors since its IPO in November 2021. The electric vehicle maker went public at $78 and its stock soared to its all-time high of $172.01 that same month, but it now trades for about $15 a share.
Rivian initially attracted a lot of attention because it was backed by Amazon and Ford Motor, and it aimed to produce 50,000 vehicles in 2022. Unfortunately, tough supply chain headwinds caused it to only produce 24,337 vehicles during the year. Its production target for 50,000 vehicles in 2023 has also fallen short of the consensus forecast for at least 62,000 vehicles -- and it quietly stopped updating its total R1 pre-orders in the fourth quarter of 2022.
Image source: Rivian.
Ford eventually divested most of its stake in Rivian, while Amazon -- which had agreed to purchase 100,000 electric delivery vans (EDVs) from the company -- also started to buy some electric vans from its rival Stellantis. Rivian also issued several recalls and was targeted by safety complaints from its own employees. And a recent $1.3 billion debt offering has sparked fresh concerns about its near-term liquidity.
All of those red flags has made Rivian a tough stock to love even though it looks dirt cheap at just 2.5 times this year's sales. By comparison, Tesla trades at 5.7 times this year's sales, but it also produced 1.37 million vehicles in 2022. For Rivian to drive away the bears, it needs to raise a few green flags.
Fortunately for the bulls, four recent developments suggest it's still too early to write off this fallen EV stock.
Green flag #1: its production update
On April 3, Rivian said it had produced 9,395 vehicles and delivered 7,946 vehicles in the first quarter of 2023. It also reaffirmed its full-year production target of 50,000 vehicles. Investors will need to wait until May 9 to see its full first-quarter financials, but that update suggests there won't be any nasty near-term surprises for the bulls.
Green flag #2: more cost-cutting moves
Rivian's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss widened from $2.8 billion in 2021 to $5.2 billion in 2022, and analysts only anticipate a slightly narrower loss of $4.5 billion in 2023. It ended 2022 with $12.1 billion in total liquidity, but that represented a steep drop from $18.4 billion a year earlier.
Rivian's decision to cut 6% of its workforce this year, which will match its 6% reduction last year, indicates that it's streamlining its business to stem the bleeding. It won't break even anytime soon, but it's taking a few steps in the right direction.
Green flag #3: Amazon's latest update
Rivian plans to deliver 100,000 EDVs to Amazon by 2030. But that deal has been tough to quantify because the two companies have been cagey with the details. That caginess has prompted some bears to believe that Amazon could follow Ford's lead and divest its stake in Rivian, which has been a dead weight on its own bottom-line growth.
But at the end of March, Amazon said it was already fulfilling deliveries in over 500 U.S. cities and regions with a fleet of more than 3,000 Rivian EDVs. That's triple the number Amazon reported last November, and suggests that closely scrutinized partnership is still going strong. Amazon also revealed that it had delivered 75 million packages with Rivian's EDVs.
Green flag #4: a potential end to Amazon's exclusivity
Rivian is locked into an exclusive EDV contract with Amazon, which placed a firm order for 10,000 EDVs for 2023 as part of its long-term order for 100,000 vehicles. However, Rivian has recently held talks with Amazon to end that exclusivity.
If that happens, we could see Rivian's EDV business break free of its chains and attract more retailers like Walmart, which invested in the struggling electric van maker Canoo last year just to prevent it from providing vehicles to Amazon, and logistics giants like Fedex, which plans to go all-electric by 2040.
Is Rivian's stock worth buying right now?
These four green flags indicate Rivian isn't down for the count yet, but they also don't fully cancel out all its previous challenges and make it a screaming bargain. I personally believe Rivian's stock will stagnate through at least the first half of this year until it proves that it can ramp up its production and narrow its losses.
Therefore, I wouldn't rush to buy Rivian right now -- especially when so many other more promising EV makers are still on sale.
