Shares of Rivian Automotive (NASDAQ: RIVN) fell 7% in Tuesday's after-hours trading, following the pure-play electric vehicle (EV) maker's release of its second-quarter 2024 report.
There wasn't a clear Rivian-specific catalyst for the decline. The company's revenue and earnings exceeded the analyst consensus estimates, and it reaffirmed its annual production guidance and expectation that it will achieve a modest gross profit in the fourth quarter.
The stock's drop likely stems from the market's recent volatility. Through Aug. 6, the S&P 500 index is down nearly 8% from its all-time closing high reached on July 16, and the tech-heavy Nasdaq Composite is 12% lower than its all-time closing peak clinched on July 10. This volatility has likely decreased investors' appetite for higher-risk stocks, such as Rivian, which is not profitable.
As background, Rivian makes two all-electric vehicles for consumers: the R1T (a pickup truck) and the R1S (an SUV). It also produces an electric delivery vehicle, currently only for Amazon , which owns a 16% stake in Rivian .
Below is an overview of Rivian's Q2 2024 results and guidance centered around eight key metrics.
1. Revenue grew 3% year over year
In Q2, Rivian's revenue was $1.158 billion, which was primarily generated from vehicles delivered in the quarter. This result surpassed Wall Street's estimate of $1.13 billion. Revenue was up 3% from the year-ago period, and down 4% from the prior quarter.
2. Produced 9,612 vehicles, down 31% from the first quarter
In the second quarter, Rivian produced a total of 9,612 vehicles, down 31% from the first quarter. And it delivered 13,790 vehicles, a 2% increase from the first quarter.
The big sequential decline in production volume and only slight increase in deliveries is not a cause for concern. These impacts were expected. Rivian's production was affected by plant downtime associated with its retooling upgrade at its Illinois factory, and the launch of its second-generation R1 vehicles.
3. Continued rollout of Amazon's 100,000 delivery vans
Rivian continues to fulfill Amazon's initial order of 100,000 custom-designed electric delivery vans (EDVs). The company doesn't disclose its quarterly production and delivery numbers for these vehicles.
4. Operating loss widened 7% year over year
Loss from operations was $1.38 billion, which is 7% wider than the operating loss in the same period last year.
5. Adjusted loss per share narrowed 7% year over year
Rivian's reported net loss was $1.46 billion, or $1.46 per share, 15% wider than in the year-ago quarter.
Adjusted for one-time items, the net loss was $1.12 billion, or $1.13 per share, a 7% improvement from the year-ago period. This result beat the loss of $1.21 per share that Wall Street had projected.
6. Cash used in operations improved 45% year over year
In the second quarter, Rivian used $754 million in cash running its operations. This result is a 45% improvement from the year-ago period.
Free cash flow was negative $1.04 billion. This outflow is a 36% improvement from the year-ago period.
7. $7.87 billion in cash and cash equivalents at the end of Q2
Rivian ended the second quarter with $7.87 billion in cash, cash equivalents, and liquid investments, and $4.43 billion in long-term debt on its balance sheet.
The cash total includes $1 billion of an unsecured convertible note Rivian issued to Volkswagen with the June announcement of the two companies' planned 50%-50% joint venture (JV) to create next-generation electrical architecture and software technology. As part of the VW deal, Rivian will license its existing intellectual property rights to the JV.
At Rivian's current cash-burn rate of $1.04 billion per quarter, its cash balance would last just over seven and a half quarters, or close to two years.
But investors should note that Rivian has the potential to receive up to an additional $4 billion in cash from its JV with VW, subject to the achievement of certain milestones and the receipt of regulatory approvals. The deal is expected to close in the fourth quarter of this year.
8. 2024 production guidance of 57,000 vehicles reaffirmed
Rivian reaffirmed its previously issued annual guidance:
- Production of 57,000 total vehicles. This would be in line with its 2023 production level of 57,232 vehicles.
- Adjusted earnings before interest, taxes, depreciation, and amortization ( EBITDA ) of negative $2.7 billion. For context, in 2023, this metric was negative $3.98 billion.
The company also reiterated that it expects to reach a modest gross profit in the fourth quarter.
Rivian is still a risky stock, but the VW partnership lowers its risk level
I'll end with a statement in Rivian's shareholder letter that I agree with:
We believe the introduction of the second generation R1 and expected partnership with Volkswagen Group will fundamentally improve Rivian's long-term profit trajectory and growth profile.
To be clear -- Rivian is still a risky stock, as it's really tough for an auto manufacturing start-up, be it producing electric vehicles or gas-powered ones, to succeed because of the auto industry's high fixed costs. But the VW partnership, assuming it closes and proceeds as planned, makes Rivian stock somewhat less risky.
And the launch of its R2 platform (midsize vehicles), which is scheduled for the first half of 2026, should further de-risk the stock, as vehicle production volumes should notably increase, better leveraging the company's fixed costs.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Volkswagen Ag. The Motley Fool has a disclosure policy .
Most Popular
Comments / 0