Rivian's (RIVN) - Get Free Report earnings announcement is just around the corner. Amid high inflation and supply-chain instability, the electric vehicle (EV) company needs to prove that its growth is on track in order to be a major player in this sustainable and revolutionary market.
Should you buy Rivian shares before the company announces its quarterly earnings on Thursday? Let's dig in.
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Rivian Earnings: Look Beyond Revenues
To beat market expectations on earnings, Rivian needs to report a loss per share lower than $1.87, and in terms of revenue, it needs to report numbers above $60 million.
Rivian currently has a market cap of $42 billion and has reported only $1 million in revenues since its IPO. However, Rivian's value is based on the demand for its technology in the future, rather than its financial results. The company itself doesn't expect to be profitable in the near future.
However, one of the main indicators to follow is the number of orders for Rivian's models. The company said that it has about 71,000 pre-orders, adding its R1T pickup and R1S SUV models.
Just as important will be the production outlook. Last quarter, the company reported that its 2021 production target would be a few hundred below the expected 1,200 vehicles. In early January of this year, Rivian reported that it had sold 1,015 vehicles in 2021, of which 920 have been delivered.
In February, the company announced that it had been making good progress toward achieving its plans to expand production at its Normal, Illinois, factory from 150,000 to 200,000 vehicles per year. However, supply-chain issues — due mainly to chip shortages — have been slowing production.
Positive updates and estimates on the number of pre-orders, as well as a ramped-up production data and its second U.S. plant to produce next-generation vehicles in 2022, may be enough to please the market.
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R1T and R1S Are More Expensive
After the company announced that it will increase the price of its R1T pickup by 17%, from $67,500 to $78,975, and its R1S SUV by 20%, from $70,000 to $84,000, Wall Street has lowered its expectations for Rivian.
The new prices will be applied only on new bookings, and the company will honor the original prices on pre-existing orders, even with a sharp rise in the cost of components and materials.
The market received the news of the price increase poorly. Rivian's stock has fallen more than 20% since the company's announcement and is at its lowest level since its IPO in November of last year.
According to Baird analyst George Gianarikas, based on the inflationary impacts on the company's cost structure, Rivian has been forced to raise its prices. He sees this as a short-term misstep. The analyst has reduced his price target on the company from $100 to $150, but he maintains a buy recommendation on the company, predicting an upside of over 130%.
Barclays analyst Brian Johnson is more bearish and has set a price target closer to Rivian's current price levels. He reduced his price target from $115 to $47 and maintains his neutral recommendation on the stock. The analyst is concerned about the company honoring the initial price of its models for pre-existing orders. Therefore, he cuts his price target based on margin assumptions through 2023.
What Should You Expect for Rivian Stock?
Momentum is not ideal for tech and growth stocks like Rivian. High inflation is a fierce enemy of high multiple stocks, and the current geopolitical situation is causing an exponential rise in commodities — especially oil. That may make inflationary rates worse for the next few quarters.
With this in mind, Wall Street needs to revise earnings forecasts for the market in general. Although Rivian is priced primarily on its technology, rather than its production or revenues, the interest rates implicit in its long-term growth could strongly affect its valuation in the near term.
However, a long-term investment in Rivian is perhaps the best approach right now. The company is very well positioned in the EV market with a solid ecosystem focused on both commercial and consumer models. And its short- to medium-term uncertainty should be due to macro jitters, rather than the demand for its technology.
Rivian is still in a very early stage of development and has a very competent management team that could make it one of the most important EV companies in the near future.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)