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The Investment Case for Rivian (RIVN) Ahead of Q2 Earnings
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Rivian Automotive (RIVN - Free Report) is slated to release second-quarter 2024 results on Aug 6, after market close. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at a loss of $1.17 a share on revenues of $1.1 billion.
The loss estimate for the second quarter of 2024 has widened by 5 cents a share over the past 30 days. The bottom-line projection indicates a year-over-year deterioration of 8.3%. The Zacks Consensus Estimate for quarterly revenues suggests a year-over-year contraction of 2.2%.
Image Source: Zacks Investment Research
For the current year, the Zacks Consensus Estimate for RIVN’s revenues is pegged at $4.81 billion, implying a rise of 8.5% year over year. The consensus mark for the 2024 bottom line is pegged at a loss of $3.81 per share, indicating an improvement from a loss of $4.88 per share in 2023. In the trailing four quarters, this California-based electric vehicle (EV) startup surpassed EPS estimates thrice and missed on the remaining occasion, with the average earnings surprise being 8.19%.
Our proven model does not conclusively predict an earnings beat for Rivian this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
In the second quarter of 2024, Rivian delivered 13,790 vehicles, implying an increase from 12,640 and 13,588 units reported in the year-ago period of 2023 and the first quarter of 2024, respectively. The deliveries also exceeded the company’s expectations of 13,000-13,300 units. Rivian's second-quarter sales rose sequentially and yearly despite a factory shutdown in April for retooling, aimed at reducing production costs and updating the R1T pickup and R1S crossover for the 2025 model year.
On the flip side, the company is expected to have experienced pressure on vehicle margins due to higher sales incentives in the April-June period compared to last year. Second-quarter production costs are likely to have been influenced by a combination of the 2024 models and the newly updated 2025 models, which have a lower cost structure. CEO RJ Scaringe stated that the retooling of the R1 manufacturing line aims to improve plant efficiency by managing supplier costs and integrating new technologies and parts into the R1 platform. However, most of the expected cost savings from these changes will not be seen until the third quarter.
Overall, Rivian's upcoming results will be shaped by a combination of increased deliveries, strategic product updates and efforts to reduce production costs, offset by margin pressure from higher sales incentives and transitional production expenses.
Price Performance & Valuation
On a year-to-date basis, shares of RIVN have declined 37%, underperforming the industry, sector and S&P 500 index.
YTD Price Performance
Image Source: Zacks Investment Research
RIVN is currently trading at a forward sales multiple of 2.54, higher than the industry but below its median of 3.37 over the last five years.
Image Source: Zacks Investment Research
Investment Thesis
Despite near-term profitability challenges, several factors make us optimistic about the stock’s potential. Rivian has completed retooling its Normal plant and introducing technologies and cost-oriented material changes into its R1 vehicle platform. These upgrades are expected to optimize manufacturing processes, significantly improving the material, depreciation, and conversion costs of its vehicles. The company remains confident in achieving modest gross profit by the fourth quarter of this year.
Another positive development is Rivian’s $5 billion deal with Volkswagen (VWAGY - Free Report) , focusing on shared EV technology and software. This partnership is expected to bolster Rivian's operations and expedite its production plans. Notably, Volkswagen will be the second legacy automaker to invest in Rivian. Previously, Ford (F - Free Report) held a roughly 12% stake alongside Amazon (AMZN - Free Report) but exited in 2023 after canceling plans to co-develop EVs.
Rivian’s new MSP product lines, including the R2, R3, and R3X, promise impressive performance, utility and range at significantly lower prices than the flagship R1. This strategy aims to expand Rivian's addressable market by opening up new global segments.
Rivian's cost-reduction strategy also sparks optimism. The introduction of the Gen 2 R1 model is expected to reduce material costs by approximately 20% throughout the year. Additionally, the upcoming R2 model is projected to cut costs by around 45% compared to the second-generation R1. Rivian aims to achieve gross profit by the fourth quarter of 2024 and positive adjusted EBITDA by 2027, with long-term targets of around 25% GAAP gross margin and a 10% free cash flow margin.
Time to Buy RIVN
Although Rivian’s margins are expected to have been under pressure in the second quarter of 2024, the company’s strategic partnerships, innovative product lines and aggressive cost-reduction measures position it well for future growth and profitability. Consequently, investors should buy the stock at current levels to reap handsome long-term rewards.
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The Investment Case for Rivian (RIVN) Ahead of Q2 Earnings
Rivian Automotive (RIVN - Free Report) is slated to release second-quarter 2024 results on Aug 6, after market close. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at a loss of $1.17 a share on revenues of $1.1 billion.
The loss estimate for the second quarter of 2024 has widened by 5 cents a share over the past 30 days. The bottom-line projection indicates a year-over-year deterioration of 8.3%. The Zacks Consensus Estimate for quarterly revenues suggests a year-over-year contraction of 2.2%.
For the current year, the Zacks Consensus Estimate for RIVN’s revenues is pegged at $4.81 billion, implying a rise of 8.5% year over year. The consensus mark for the 2024 bottom line is pegged at a loss of $3.81 per share, indicating an improvement from a loss of $4.88 per share in 2023. In the trailing four quarters, this California-based electric vehicle (EV) startup surpassed EPS estimates thrice and missed on the remaining occasion, with the average earnings surprise being 8.19%.
Rivian Automotive, Inc. Price and EPS Surprise
Rivian Automotive, Inc. price-eps-surprise | Rivian Automotive, Inc. Quote
Earnings Whispers for Q2
Our proven model does not conclusively predict an earnings beat for Rivian this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
RIVN has an Earnings ESP of -10.68% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
What’s Shaping Q2 Results?
In the second quarter of 2024, Rivian delivered 13,790 vehicles, implying an increase from 12,640 and 13,588 units reported in the year-ago period of 2023 and the first quarter of 2024, respectively. The deliveries also exceeded the company’s expectations of 13,000-13,300 units. Rivian's second-quarter sales rose sequentially and yearly despite a factory shutdown in April for retooling, aimed at reducing production costs and updating the R1T pickup and R1S crossover for the 2025 model year.
On the flip side, the company is expected to have experienced pressure on vehicle margins due to higher sales incentives in the April-June period compared to last year. Second-quarter production costs are likely to have been influenced by a combination of the 2024 models and the newly updated 2025 models, which have a lower cost structure. CEO RJ Scaringe stated that the retooling of the R1 manufacturing line aims to improve plant efficiency by managing supplier costs and integrating new technologies and parts into the R1 platform. However, most of the expected cost savings from these changes will not be seen until the third quarter.
Overall, Rivian's upcoming results will be shaped by a combination of increased deliveries, strategic product updates and efforts to reduce production costs, offset by margin pressure from higher sales incentives and transitional production expenses.
Price Performance & Valuation
On a year-to-date basis, shares of RIVN have declined 37%, underperforming the industry, sector and S&P 500 index.
YTD Price Performance
Image Source: Zacks Investment Research
RIVN is currently trading at a forward sales multiple of 2.54, higher than the industry but below its median of 3.37 over the last five years.
Image Source: Zacks Investment Research
Investment Thesis
Despite near-term profitability challenges, several factors make us optimistic about the stock’s potential. Rivian has completed retooling its Normal plant and introducing technologies and cost-oriented material changes into its R1 vehicle platform. These upgrades are expected to optimize manufacturing processes, significantly improving the material, depreciation, and conversion costs of its vehicles. The company remains confident in achieving modest gross profit by the fourth quarter of this year.
Another positive development is Rivian’s $5 billion deal with Volkswagen (VWAGY - Free Report) , focusing on shared EV technology and software. This partnership is expected to bolster Rivian's operations and expedite its production plans. Notably, Volkswagen will be the second legacy automaker to invest in Rivian. Previously, Ford (F - Free Report) held a roughly 12% stake alongside Amazon (AMZN - Free Report) but exited in 2023 after canceling plans to co-develop EVs.
Rivian’s new MSP product lines, including the R2, R3, and R3X, promise impressive performance, utility and range at significantly lower prices than the flagship R1. This strategy aims to expand Rivian's addressable market by opening up new global segments.
Rivian's cost-reduction strategy also sparks optimism. The introduction of the Gen 2 R1 model is expected to reduce material costs by approximately 20% throughout the year. Additionally, the upcoming R2 model is projected to cut costs by around 45% compared to the second-generation R1. Rivian aims to achieve gross profit by the fourth quarter of 2024 and positive adjusted EBITDA by 2027, with long-term targets of around 25% GAAP gross margin and a 10% free cash flow margin.
Time to Buy RIVN
Although Rivian’s margins are expected to have been under pressure in the second quarter of 2024, the company’s strategic partnerships, innovative product lines and aggressive cost-reduction measures position it well for future growth and profitability. Consequently, investors should buy the stock at current levels to reap handsome long-term rewards.