Macro pressures might be blunting the demand outlook for EVs but that didn’t stop Rivian (NASDAQ:RIVN) exceeding expectations when it announced its Q3 delivery haul at the start of October.
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The company produced 16,304 vehicles whilst delivering 15,564 units, above the 14,900 anticipated on Wall Street and representing quarter-over-quarter delivery growth of 23%.
However, that might be the pinnacle for a while, says RBC’s Tom Narayan. “This was a very strong result,” opined the analyst, “and it won’t be possible to see much higher volume until the R1 line is re-tooled mid 2024.”
With the EV maker about to release its Q3 print today after the close, Narayan is calling for Q3 revenue of $1.31 billion, roughly in-line with consensus at $1.32 billion. However, Narayan’s adj. EBITDA to forecast of -$976 million is slightly higher than the Street’s -$1.07 billion estimate.
While the Q3 delivery haul outstripped expectations, shares fell in the aftermath of the announcement as Rivian’s expectation for full-year deliveries remained at 52,000, still lower than consensus at 53,600. “However,” says Narayan, “we still see room for the full year guidance to be raised from current 52k vehicles produced. We think RIVN is on track for closer to 54k units.”
That should result in “modest upside” on the EBITDA front compared to Rivian’s 2023 guide for -$4.2 billion, with Narayan looking for “slightly better” than -$4 billion.
One big worry for investors has been the extensive cash burn rate. That currently stands at $1 billion per quarter plus the company plans to spend billions on its Georgia facility, yet the company is still confident it can sustain operations using its available cash until 2025, even when factoring in capital expenditures of $2 billion in both 2024 and 2025.
At the same time, management also expects gross margin improvement and anticipates 2024 will be an “inflection point to turn positive.” “The timing and nature of the refresh of the R1 production line in mid-2024 will be a focus on the call,” Narayan summed up, “as investors look to understand margin implications of the change.”
For now, Narayan remains on the sidelines with a Sector Perform (i.e., Neutral) rating on RIVN shares, while his $15 price target implies a 13% pullback over the next year. (To watch Narayan’s track record, click here)
That objective, though, is one of the Street’s lowest and in contrast, the $27.95 average target represents a 64% improvement from current levels. Rating wise, based on a mix of 14 Buys, 6 Holds and 1 Sell, the analyst consensus rates RIVN stock a Moderate Buy. (See Rivian stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
