Would you believe that analysts are generally optimistic about Rivian Automotive (NASDAQ: RIVN) over the next 12 months? This is true even though RIVN stock lost a lot of value last year. I am neutral on Rivian stock as I like the electric vehicle (EV) industry overall, but Rivian’s future prospects are weighed down by a dwindling cash position, a missed EV production target, and supply-chain disruptions.
Rivian Automotive makes EVs with a touch of class but also a great deal of raw power. They’re probably great vehicles to own for folks who can afford them during these inflationary times.
Plus, it’s doubtful whether Rivian can even produce its vehicles in a timely manner. It’s fine to root for Rivian to overcome its challenges, but betting your hard-earned money on RIVN stock likely isn’t a prudent thing to do right now.
Rivian Disclosed Its Production Tally, but Not the Context
Just a few days ago, Rivian published a press release announcing its production and delivery figures for Q4 2022 and the full year of 2022. Unfortunately, the press release is quite brief and provides very little, if anything, context or explanation.
That’s certainly a bad sign. When there’s positive data to report, a company is very likely to brag about it in the press release. You’ll probably see bullet points at the top of the page, along with some confident quotes from the company’s management.
There was none of that, however. So, here’s the rundown: from Rivian’s manufacturing plant in Illinois, the company produced 10,020 vehicles and delivered 8,054 vehicles during last year’s fourth quarter. For the entirety of 2022, Rivian produced 24,337 vehicles and delivered 20,332 vehicles.
Here’s the problem. Rivian’s production target for 2022 was 25,000 vehicles. Thus, the automaker fell short of this target. Oddly enough, though, RIVN stock rallied after the company released its production data.
Granted, 24,337 vehicles isn’t a huge miss compared to a target of 25,000. However, it’s worrisome to learn from The Wall Street Journal that, according to CEO R.J. Scaringe, over 700 vehicles were delayed in production because they needed parts and/or work done. As for Rivian missing its production target, Scaringe blamed the supply-chain crisis. Still, 25,000 vehicles seems like a low bar to clear even amid component-sourcing constraints, so the actual EV production result shouldn’t have induced a share-price rally.
Investors Should Consider Rivian’s Operational and Fiscal Concerns
Not to be overly negative, but there’s still more to worry about when it comes to Rivian. For one thing, Rivian’s factory in Illinois – the automaker’s only factory – closed for 20 days and shut down early for an additional 50 days last year. That’s something you won’t hear about in Rivian’s most recent press release.
Here’s another fact you won’t see in that press release: Rivian had $13.3 billion worth of cash and cash equivalents at the end of September 2022. That sounds good until you consider that the company had $14.9 billion in cash and cash equivalents at the end of June.
Frankly, it’s difficult to construct a convincing bullish argument in favor of RIVN stock now. The company isn’t profitable now and isn’t expected to be profitable on a full-year basis until 2027. That’s a hard pill for any investor to swallow, though patience could pay off in five or 10 years. Ask yourself: am I willing to wait that long and ride out the share-price volatility?
Is RIVN Stock a Buy, According to Analysts?
Here’s an interesting point, though. The experts on Wall Street generally like Rivian. RIVN stock has a Moderate Buy consensus rating based on 12 Buys, four Holds, and three Sell ratings. The average Rivian price target is $38.94, implying 137.66% upside potential. So, maybe there’s a rally on the way, and the Rivian bears will have to hibernate this year.
Conclusion: Should You Consider Rivian Stock?
It’s fine to listen to the experts on Wall Street, but you have to make the final decisions when it comes to your investments. To me, at least, the bump in RIVN stock wasn’t fully justified, as Rivian remains highly vulnerable to supply-chain disruptions.
Besides, the overall trajectory of RIVN stock is still clearly to the downside. Therefore, it’s fine to treat Rivian shares as lottery tickets, but don’t feel the need to go overboard and load up on an EV stock with substantial risks in 2023.