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Home The Latest Strong Demand For Rivian's Electic Vehicles, Time To Buy?

Strong Demand For Rivian’s Electic Vehicles, Time To Buy?

Electric automobile maker Rivian Automotive’s (RIVN) efforts to diversify its shopper and business autos portfolio have helped it witness substantial demand. But sadly, the corporate faces varied challenges, together with provide chain hold-ups and rising enter prices. Moreover, provided that the inventory’s damaging revenue margin may very well be a deterrent amid recession fears, is it price investing within the inventory now? Read on to know our view.


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Electric automobile producer Rivian Automotive, Inc. (RIVN) designs and develops five-passenger pickup vehicles and sports activities utility autos. The automaker’s flagship merchandise, R1T and R1S, have been witnessing sturdy demand. As of May 9, 2022, RIVN acquired over 90K internet R1 preorders from customers within the United States and Canada.

However, misplaced manufacturing time on account of provide chain constraints and semiconductor chip shortages might threaten the expansion of the EV maker. Its shares have declined 37.7% over the previous three months and 74.7% year-to-date. The inventory is buying and selling 85.4% beneath its 52-week excessive of $179.47, indicating bearishness.

Although RIVN’s collaboration with Amazon.com, Inc. (AMZN) to launch its Electric Delivery Van and improved natural progress alternatives might allow it to extend its share within the present markets, the corporate’s damaging revenue margin on account of rising overhead prices may very well be regarding.

On high of that, rising logistics bills on account of provide chain constraints might harm the EV producer’s prospects.

Here is what we predict might affect RIVN’s efficiency within the close to time period:

A Slew of Challenges

As the Russia-Ukraine battle continues, provide constraints of essential supplies and rising costs of nickel, lithium, and different supplies proceed to threaten manufacturing charges of electrical automobile producers like RIVN.

Since the automaker has been witnessing provide chain bottlenecks of semiconductors and some non-semiconductor parts, it’s pressured to halt manufacturing for prolonged intervals than anticipated, leading to practically 1 / 4 of the deliberate manufacturing time being misplaced.

Furthermore, its damaging profitability amid inflation uncertainties and fears {that a} recession is unavoidable might harm investor sentiment.

Lackluster Financials

RIVN’s complete working bills for the primary quarter ended March 31, 2022, had been $1.08 billion. This compares to $410 million for the primary quarter of 2021. Also, its internet loss got here in at $1.59 billion, whereas its loss per share got here in at $1.77 over this era.

Moreover, the EV maker’s loss from operations rose 285.1% year-over-year to $1.58 billion. Furthermore, RIVN’s gross revenue stood at a damaging $502 million, primarily attributable to low volumes on manufacturing strains designed for increased volumes. Its adjusted EBITDA got here in at $1.14 billion in comparison with $396 million for a similar interval within the prior 12 months.

Its trailing-12-month ROE, ROA, and ROTC are damaging 69.5%, 27.6%, and 28.2%, respectively. Also, the corporate’s trailing-12-month money from operations stood at a damaging $3.29 billion.

Stretched Valuation

In phrases of trailing-12-month EV/Sales, RIVN is presently buying and selling at 58.46x, which is considerably increased than the trade common of 1.1x. Its ahead Price/Sales a number of of 12.87 is 1,411.6% increased than the trade common of 0.85.

Unfavorable POWR Ratings

RIVN has an total score of D, which interprets to Sell in our POWR Ratings system. The POWR Ratings are calculated by taking into consideration 118 various factors, with every issue weighted to an optimum diploma.

Our proprietary score system additionally evaluates every inventory based mostly on eight totally different classes. RIVN has a C grade for Quality. The inventory’s damaging ROE and ROA are mirrored on this grade.

Also, it has a C grade for Value, which is per the inventory’s premium valuation.

In phrases of Stability Grade, RIVN has an F, indicating that the inventory is extra risky than its friends.

Beyond the grades we have highlighted, one can try further RIVN scores for Sentiment, Growth, and Momentum right here.

Of the 65 shares within the F-rated Auto & Vehicle Manufacturers trade, RIVN is ranked #42.

Bottom Line

Even although RIVN’s strong model and product portfolio and the launch of its business enterprise in collaboration with Amazon have raised traders’ hope in regards to the inventory’s prospects, it may very well be clever to steer clear from the inventory as a result of its weak fundamentals should not in sync with its premium valuation.

Moreover, rising logistics and overhead prices and provide chain limitations might additional strain its backside line.

How Does Rivian Automotive (RIVN) Stack Up Against its Peers?

While RIVN has a D score in our proprietary score system, one may wish to contemplate looking at its trade peer, Honda Motor Company, Ltd. (HMC), which has an A (Strong Buy) score, and Mazda Motor Corporation (MZDAY) and Bayerische Motoren Werke Aktiengesellschaft (BMWYY), which have an total B (Buy) score.

RIVN shares . Year-to-date, RIVN has declined -74.69%, versus a -22.73% rise within the benchmark S&P 500 index throughout the identical interval.

About the Author: Imon Ghosh

Imon is an funding analyst and journalist with an enthusiasm for monetary analysis and writing. She started her profession at Kantar IMRB, a number one market analysis and shopper consulting group.

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