{"id":32213,"date":"2023-07-06T11:44:05","date_gmt":"2023-07-06T15:44:05","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/rivian-stock-rises-as-it-incinerates-cash-delivers-to-amazon\/"},"modified":"2023-07-06T11:44:07","modified_gmt":"2023-07-06T15:44:07","slug":"rivian-stock-rises-as-it-incinerates-cash-delivers-to-amazon","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=32213","title":{"rendered":"Rivian Stock Rises As It Incinerates Cash, Delivers To Amazon"},"content":{"rendered":"<div>\n<p>If you want your portfolio to rise in value, buy stock in companies reporting better results than investors expect. If you have an appetite for risk, buy into companies with heavy short bets based on operational problems and high cash burn.<\/p>\n<p>If such companies beat expectations, they will enjoy a surge in their share prices. That\u2019s what happened to Irvine, Calif-based electric van maker, Rivian.<\/p>\n<p>This week, Rivian made and shipped more EVs than investors expected and its shares soared, noted <em data-ga-track=\"ExternalLink:https:\/\/www.investopedia.com\/rivian-beats-ev-deliveries-estimate-shares-jump-7556842\">Investopedia<\/em>.<\/p>\n<p>Should you invest in Rivian stock? I think the answer is no. In addition to Rivian\u2019s high cash burn rate, D.A. Davidson analyst Michael Shlisky sees operational risks ahead that could disappoint investors, <em data-ga-track=\"ExternalLink:https:\/\/www.morningstar.com\/news\/marketwatch\/20230705137\/rivian-stocks-biggest-bear-backs-away-from-their-sell-call\">MarketWatch<\/em> reported.<\/p>\n<p>Rivian investors \u2014 who have watched the company\u2019s shares lose 86% of their value since peaking in November 2022 \u2014 might be better off if the automaker were to endure these growing pains as a private company.<\/p>\n<p><fbs-ad position=\"inread\" progressive=\"\" ad-id=\"article-0-inread\" aria-hidden=\"true\" role=\"presentation\"><\/fbs-ad><\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">Rivian\u2019s Month Of Good News<\/h2>\n<p>Rivian stock has popped 22% since the start of July. Higher-than-expected electric van deliveries in second quarter caused the rise. According to <em>CNBC<\/em>, here are the key numbers:<\/p>\n<ul>\n<li><strong>Second quarter EV deliveries<\/strong> <strong>were up 59%. <\/strong>from the previous quarter to 12,640 \u2014 15% higher than investors expected.<\/li>\n<li><strong>2023 EV production to increase 100%<\/strong> <strong>to 50,000 vehicles by the end of 2023. <\/strong>In the first half of the year, Rivian produced roughly 23,400 EVs. Analysts polled by FactSet expect Rivian to fall 3,000 units short of its 2023 production target, the <em data-ga-track=\"ExternalLink:https:\/\/www.wsj.com\/articles\/rivian-shares-climb-after-ev-deliveries-outpace-estimates-e39faa12\">Wall Street Journal<\/em><em> <\/em>reported.<\/li>\n<li><strong>Amazon to take delivery of more than 300 Rivian EVs in Germany.<\/strong> In July 2022, Amazon began using Rivian EVs to deliver its packages after the e-commerce giant\u2019s $700 million equity investment in the automaker in 2019, noted <em>Investopedia<\/em>.<\/li>\n<\/ul>\n<p>Rivian \u2014 which may be benefiting from Tesla\u2019s 83% rise in second quarter deliveries \u2014 cut an agreement in June that will enable Rivian owners to use Tesla\u2019s fast-charger network beginning in 2025, noted the <em>Journal<\/em>.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">Rivian\u2019s Mixed First Quarter Earnings<\/h2>\n<p>All is not well with Rivian \u2014 which provides electric R1T pickups for business and R1S SUVs for consumers.<\/p>\n<p>On May 9, Rivian delivered investors a mixed financial report for the first quarter of 2023. The good news was the company had losses that were narrower than investors expected, it decided to conserve cash through spending cuts, and it held pat on its 50,000-unit production target, the <em>Journal<\/em> reported.<\/p>\n<p>While Rivian shares increased after the announcement, the automaker\u2019s CEO RJ Scaringe expressed concern about making a profit before it runs out of money. He told investors, \u201cWe have a lot of work to do in terms of continuing to drive our production ramp and drive costs down.\u201d<\/p>\n<p>Rivian has experienced numerous growing pains, noted the <em>Journal<\/em>. These include the following:<\/p>\n<ul>\n<li><strong>Dropping production. <\/strong>In the first quarter, the company fell 625 vehicles short of the 10,020 it produced in the final quarter of 2022.<\/li>\n<li><strong>Under-pricing its EVs. <\/strong> \u201cA large portion of Rivian\u2019s existing orders for the were placed before the company raised prices to help offset rising raw-material costs,\u201d noted the <em>Journal<\/em>.<\/li>\n<\/ul>\n<p>Investors are somewhat skeptical of the company. In June, short interest in Rivian stock topped 13%, according to the <em>Journal.<\/em><\/p>\n<p>Rivian ended March with cash of $11.1 billion. However, it is unclear how long that sum will last. In 2022, the company burned through $6.4 billion in free cash flow. In Q1 of 2023, Rivian consumed $1.8 billion in free cash flow.<\/p>\n<p>Rivian loses money on every vehicle it ships. For example, its gross profit \u2014 revenue minus cost of goods sold minus depreciation \u2014 was negative $593 million in the first quarter. Rivian never has made a penny of profit on its vehicles.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">Where Rivian Stock Goes From Here<\/h2>\n<p>Last July, I wrote skeptically about Rivian\u2019s prospects. What strikes me is how analysts were able to look past the company\u2019s struggles to meet production goals and to lower its cash burn rate.<\/p>\n<p>One analyst, Vijay Rakesh, cut his price target on Rivian by $10 to $70 a share \u2014 which then was 141% more than its July 2022 stock price. Things have grown worse for the company worse. On July 6, that $70 price target was 250% more than its stock price.<\/p>\n<p>The basis for Rakesh\u2019s optimism was a bright future for the EV industry and a belief in Rivian\u2019s ability to solve its production problems. According to <em>CNBC<\/em>, he expected improvement in the second half of 2022, \u201cDespite elevated macro risks, BEV could see strong ramps as China re-opens and demand improves, with BEVs potentially up &gt;55%.\u201d<\/p>\n<p>Rivian is optimistic its supply chain difficulties are easing and it is negotiating with Amazon to sell its EVs to other customers. According to <em data-ga-track=\"ExternalLink:https:\/\/www.chicagobusiness.com\/transportation\/rivian-ceo-eyes-production-ramp-new-partners-after-supply-woes\">Bloomberg<\/em>, Scaringe said, \u201cWhat we saw in Q2 is really the beginnings of the supply chain now running in a healthy way. We are in the final stages of negotiating, allowing us to sell the vehicle outside of the Amazon relationship to others.\u201d<\/p>\n<p>News of Amazon taking delivery of more than 300 EVs in Germany prompted one analyst to upgrade Rivian. According to <em>MarketWatch<\/em>, Shlisky adjusted the automaker\u2019s rating from under-perform to neutral \u2014 raising his price target from $11 to $18.<\/p>\n<p>His less negative outlook is due to two news items: First, Rivian delivered EVs to Germany far sooner than he had expected. He also applauded Rivian\u2019s acquisition of Sweden-based Internio, a developer of a mapping app he thinks \u201cshould improve the in-cabin experience for users of Rivian vehicles\u201d and provide data that can help the company be more effective at planning and marketing products.<\/p>\n<p>Nevertheless, Shlisky hesitates to recommend Rivian stock. noting the EV maker could suffer from \u201csupplier change-overs and ramp-up challenges, and could face increased cancellations and production-backlog mismatches,\u201d <em>MarketWatch <\/em>wrote.<\/p>\n<p><em>CNN<\/em> notes 20 analysts who set 12-month price targets are more optimistic. Their average price target of $24.45 gives the stock nearly 20% upside.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/petercohan\/2023\/07\/06\/rivian-stock-rises-as-it-incinerates-cash-delivers-to-amazon\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you want your portfolio to rise in value, buy stock in companies reporting better results than investors expect. If you have an appetite for risk, buy into companies with heavy short bets based on operational problems and high cash burn. If such companies beat expectations, they will enjoy a surge in their share prices. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":32214,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-32213","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets","tag-featured"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Rivian Stock Rises As It Incinerates Cash, Delivers To Amazon | iFintechWorld<\/title>\n<meta name=\"description\" content=\"If you want your portfolio to rise in value, buy stock in companies reporting better results than investors expect. 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