What happened
Shares of electric truck maker Rivian Automotive (RIVN +0.78%) took it on the chin yesterday as a "red" stock market spooked investors in volatile growth companies. Worries over rising interest rates may have also caused investors to wonder whether Rivian's business selling $80,000 electric trucks will be viable in the long run.
Lost in all the bad news, however, was some good news for Rivian shareholders: positive notes of support from two of Wall Street's investment banks, which are helping to lift Rivian stock 6.6% through 11:15 a.m. today.
NASDAQ: RIVN
Key Data Points
So what
In back-to-back notes, reported on StreetInsider and TheFly, respectively (but apparently unnoticed, or disregarded, by investors in a hurry to sell), the following happened:
- Goldman Sachs raised its price target on Rivian to $24 per share (but kept a neutral rating).
- Then Truist bank doubled down on its price target of $30 per share (and maintained its buy rating).
Both analysts seem to have been encouraged by Rivian's report on Monday that it produced 16,304 electric vehicles at its Normal, Illinois, factory and delivered 15,564 of those EVs to buyers. This, said the company, keeps the company "on track" to hit its target of 52,000 electric trucks produced this year. What's more, as Truist pointed out, the 16,304 number was ahead of expectations.
Now what
In fact, though, the news could be even better than that. As Truist noted, Rivian has so far produced "just shy" of 40,000 units through Q3 2023. If the company just repeats the number of trucks produced in Q3, though -- about 16,000 -- it should blow past its 52,000-unit target by the end of Q4. And if the production rate increases in Q4, the margin of victory could be quite significant.
But is this really good news?
Granted, beating production targets would be a PR victory for the company. But even if Rivian does produce 4,000 more trucks than it's planned, and this generates an additional $320 million in revenue for the company (assuming a rough $80,000 in additional revenue per truck produced), well, added to analyst forecasts for $4.3 billion in revenue this year, this would still result in only about $4.6 billion in revenue for the year.
With operating costs still running on the order of $5.8 billion annually, this wouldn't be enough to lift Rivian into profitability for the year. Indeed, with Rivian still losing money on every truck it produces, it's reasonable to assume that selling more trucks will increase the company's losses.
Fact is, most analysts predict Rivian won't turn profitable before 2030 at the earliest. Investors rushing back into the stock today on hopes of a "production beat," years before profits arrive, could be walking into a trap.
