Will Rivian ever make money? In 2022, shares of Rivian Automotive (NASDAQ: RIVN) had a significant downward revaluation, and they continued to decline in the following year.
After Tesla’s (TSLA(unsatisfactory )’s delivery statistics for December) disappointing delivery figures, Rivian shares fell 6% yesterday, reaching a new 1-year low of $17.08.
Rivian also said that it produced fewer electric cars in FY 2022 than the 25,000 it had projected.
I have changed my recommendation for Rivian from hold to sell since I think the pricing and risk profile are both quite unappealing at the moment.
Rivian just dropped to a new 1-year low
Yesterday, shares of Rivian hit a record low for the year due in large part to Tesla’s escalating sell-off and Rivian’s failed production projection for FY 2022.
Tesla announced 405,278 deliveries in the fourth quarter and 1.31M deliveries overall in 2022, representing a 40% year-over-year growth rate.
After achieving a significant production comeback in Q4 of 2012, Tesla was unable to meet its target of increasing deliveries by 50% yearly.
The delivery outcome sent Tesla’s stock down more than 12% on Tuesday, dragging down the whole EV market in the process.
Moreover, Rivian said yesterday that it delivered 8,054 automobiles during the fourth quarter while producing 10,020 during the same period in 22.
The production at Rivian’s factory in Normal, Illinois, increased 36% quarter over quarter. Rivian delivered a total of 20,332 electric cars in FY 2022, out of the total of 24,337 vehicles produced by the electric vehicle manufacturer.
Despite a respectable improvement in production levels from one quarter to the next, Rivian was unable to meet its target of 25,000 electric cars for the fiscal year 2022.
Investors should also keep in mind that the electric car manufacturer reduced its forecast for production in the middle of FY 2023 owing to supply chain interruptions from 50,000 to 25,000 electric vehicles.
Yesterday’s decline in Rivian’s stock price was a consequence of both yesterday’s disappointing delivery figures from Tesla and Rivian’s failure to meet its production target for the fiscal year 2022. The market capitalization of the firm has decreased by almost 83% during the last year.
The current negative sentiment overhang increases the very real possibility that Rivian’s shares will continue to correct downward in the near future.
In fact, in my opinion, the company’s stock price may potentially drop to single digits.
Investors definitely overpaid for Rivian’s expectations for production and delivery in FY 2022, and a major negative sentiment overhang has been formed as a result of investors’ waning interest in electric vehicle firms.
Rivian’s valuation is just too high
Although falling to a new record low yesterday, Rivian’s shares remain overpriced given the manufacturing and delivery realities of the EV maker.
Now, shares of Rivian are priced at a forward P/S ratio of 1.5 X, which is just below Tesla’s P/S ratio (2.4 X). But, Tesla is already profitable and provides its customers with hundreds of thousands of electric automobiles each quarter.
Estimates may possibly be overly optimistic as Rivian struggles to increase plant production.
It is anticipated that Rivian would increase its revenue by 200% to $5.3 billion in FY 2023 and by 104% to $10.8 billion in FY 2024.
Rivian, an electric car manufacturer, may not be able to scale up production of its R1T and R1S electric vehicles as swiftly as anticipated next year, however, given that the business just failed to fulfill its (lowered) production goal.
With estimates going drastically down over the last 90 days, Rivian’s revenue estimate trend is similarly quite negative: the ratio of downward revisions to upward revisions for the company’s top line for FY 2022 is 13:3.
Risks with Rivian
At this time, Rivian’s main commercial risk is a disappointing production projection for FY 2023.
When Rivian announces profits in March 2023, it will probably include its production goal for this year.
A weak delivery projection might further damage Rivian’s already-damaged worth.
If there are no other production failures connected to the supply chain, I predict that Rivian might produce 50–60 thousand electric cars in FY 2023.
Any figure below a doubling of output (year over year) would certainly be seen as yet another setback.
Conclusion
Given that Rivian missed its production target, I think there’s a very real chance that the company will continue to lose value.
The EV industry as a whole is experiencing a negative mood overhang as investors get weary of the optimistic delivery predictions and subpar execution in FY 2022.
Due to these factors, I predict that pressure on EV stocks, such as Rivian, would be persistently strong in FY 2023, particularly if revenue expectations keep decreasing.
The EV stock can drop to a single-digit stock if Rivian presents a meager production goal for the current year!
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