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Rivian: ‘Zombie’ company or charging down a path to EV success?

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By James Rogers

This a crucial time for car maker Rivian Automotive Inc., as it battles for its place in the competitive electric vehicle market.

Rivian Automotive Inc.’s /zigman2/quotes/230726939/composite RIVN -1.27% stock price has fallen 64.6% this year, outpacing the S&P 500 Index’s /zigman2/quotes/210599714/realtime SPX -0.35% decline of 13.5%. The young car maker, which  went public  last year, has struggled with production issues, but its production numbers released last month were seen as a positive by Wall Street, sending its stock rallying . The company also kept its target of producing 25,000 vehicles this year.

Rivian describes itself as a maker of “electric adventure vehicles,” such as its R1T pickup truck and R1S SUV. The company’s stock received a boost last month when Amazon.com. Inc. /zigman2/quotes/210331248/composite AMZN -0.90% started rolling out Rivian’s electric delivery vans.

Nonetheless, investment research firm New Constructs added Rivian to its list of “zombie” companies on Tuesday, citing cash as a potential problem for the car maker. Other companies on New Constructs’ “zombie” list include Carvana Co. /zigman2/quotes/206651606/composite CVNA +2.50% , Freshpet Inc. /zigman2/quotes/204676095/composite FRPT -2.86% , Peloton Interactive Inc. /zigman2/quotes/208035743/composite PTON -1.21% , Snap Inc. /zigman2/quotes/205087158/composite SNAP +1.03% and Beyond Meat Inc. /zigman2/quotes/211617595/composite BYND -1.31% .

See Now: Fuel cell, EV and solar stocks rally as climate bill makes ‘alternative’ energy more ‘in the money’

“Rivian Automotive’s stock is in danger of declining to $0 per share as it faces a deep cash shortage that should worry investors,” wrote David Trainer, CEO of New Constructs, in a note. “Rivian must dramatically cut costs and lower its cash burn, which will be extremely difficult as it must ramp up production and scale to meet investors’ high expectations in the very competitive electric vehicle market.”

The company had $17 billion in cash and equivalents at the end of its first quarter, which ended in March. This excluded capacity under an asset-based revolving credit facility. The company’s first-quarter loss from operations was $1.579 billion, after a loss of $410 million in the prior year’s quarter. The operating loss contributed to a widening net loss of $1.593 billion, after a net loss of $414 million in the same period last year.

While New Constructs is concerned about Rivian’s prospects, at least one analyst is confident that the company is heading in the right direction. “We believe to the contrary Rivian is on a path to success and its production trajectory is now back on track,” Dan Ives, managing director and senior equity analyst at Wedbush, told MarketWatch. “The company has a strong war chest and they will continue to prove the haters wrong one delivery at a time.”

Wedbush has an outperform rating for Rivian and raised its price target to $40 from $30 last month. The electric vehicle maker, Wedbush said, is starting to overcome the production issues that have beset the company in recent months.

See Now : Rivian ‘finally starting to turn the corner’ says Wedbush, raising EV maker’s price target

D.A. Davidson has an underperform rating on Rivian and a $24 price target. “We have not put a target of $0 on the shares, however—that might be a bit too bearish,” Michael Shlisky, managing director of equity research at D.A. Davidson & Co, told MarketWatch. “We are concerned about the costs of building a coast-to-coast network of charging stations and experience centers, as well as reservation cancellations if the final Inflation Reduction Act’s terms are not changed.”

Rivian has already warned that planned revisions to the EV tax credit would put it at a disadvantage to more established competitors, according to the Wall Street Journal.

On Sunday the Senate passed the Inflation Reduction Act, which aims to reduce carbon emissions by roughly 40 percent by 2030. An expected vote on the measure is expected in the House of Representatives on Friday.

Other areas, such as higher component costs from suppliers and elevated costs to service existing vehicles, are also risks to Rivian’s cash burn, according to Shlisky.

See Now : These ‘zombie’ companies could feel the cash burn, warns New Constructs

Rivian may also have to expand internationally to achieve the scale needed to compete on price, Shlisky added. “These are all in Rivian’s longer-term plans, but execution on these plans will be key,” he said.

Of 17 analysts surveyed by FactSet, 10 have a buy rating on Rivian, six have a hold rating and one has a sell rating.

Rivian reports its second-quarter results after market close on Thursday.

/zigman2/quotes/230726939/composite
US : U.S.: Nasdaq
$ 33.42
-0.43 -1.27%
Volume: 6.55M
Sept. 27, 2022 12:54p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$31.02 billion
Rev. per Employee
$49,319
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/zigman2/quotes/210599714/realtime
US : S&P US
3,642.36
-12.68 -0.35%
Volume: 2.22B
Sept. 27, 2022 12:54p
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/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 114.11
-1.04 -0.90%
Volume: 33.39M
Sept. 27, 2022 12:54p
P/E Ratio
101.83
Dividend Yield
N/A
Market Cap
$1173.10 billion
Rev. per Employee
$302,178
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/zigman2/quotes/206651606/composite
US : U.S.: NYSE
$ 25.05
+0.61 +2.50%
Volume: 5.13M
Sept. 27, 2022 12:54p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$4.61 billion
Rev. per Employee
$695,905
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/zigman2/quotes/204676095/composite
US : U.S.: Nasdaq
$ 45.46
-1.34 -2.86%
Volume: 611,146
Sept. 27, 2022 12:54p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.24 billion
Rev. per Employee
$635,788
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/zigman2/quotes/208035743/composite
US : U.S.: Nasdaq
$ 8.12
-0.10 -1.21%
Volume: 8.07M
Sept. 27, 2022 12:54p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.78 billion
Rev. per Employee
$366,605
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/zigman2/quotes/205087158/composite
US : U.S.: NYSE
$ 10.29
+0.11 +1.03%
Volume: 12.49M
Sept. 27, 2022 12:54p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$16.79 billion
Rev. per Employee
$801,800
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/zigman2/quotes/211617595/composite
US : U.S.: Nasdaq
$ 14.35
-0.19 -1.31%
Volume: 1.97M
Sept. 27, 2022 12:54p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$925.73 million
Rev. per Employee
$326,712
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