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Rivian Stock: Cash Is Now 50% Of Market Cap (NASDAQ:RIVN)

Electric Truck Maker Rivian Debuts On The Nasdaq Exchange

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Rivian Automotive Inc. (RIVN) noticed its inventory value fall after earnings had been launched, owing to an sudden discount on this yr’s manufacturing goal. Rivian Automotive can also be coping with rising prices and provide chain points, that are affecting its manufacturing forecast.

The decreased manufacturing goal is simply a short lived stumbling block that Rivian Automotive will be capable to overcome. I like to recommend that traders focus solely on Rivian Automotive’s long-term potential within the electric-vehicle market and its excessive cash-to-market-capitalization ratio.

Rivian’s Trimmed Its Production Outlook For 2022

Just just a few days in the past, I argued that Rivian Automotive must be valued primarily based on its long-term gross sales potential out there for electric-vehicles, particularly pickup vans, SUVs, and industrial supply vans, fairly than earnings per share.

Unfortunately, Rivian Automotive minimize its manufacturing steering for 2022 yesterday resulting from provide chain points which might be affecting part sourcing in a well timed method.

Rivian Automotive expects to supply 25,000 electric-vehicles this yr throughout its R1 and RCV platforms, with a complete manufacturing capability of fifty,000 autos in 2022. R1T vans, R1S SUVs, and EDV-700 industrial supply vans are among the many autos focused for manufacturing.

Rivian Automotive has produced a complete of two,425 electric-vehicles in its historical past. The firm additionally produced 1,410 electric-vehicles in 2022, up till March 8, and plans to considerably improve manufacturing within the coming years.

Rivian Automotive expects to spend $2,600 million on capital expenditures this yr, all of which can go towards rising manufacturing capability. The forecast assumes a rise in capital expenditures starting in 2021, leading to $1,794 million in infrastructure investments.

Rivian Automotive expects provide chain constraints to severely restrict manufacturing this yr, although the EV firm particularly said that its manufacturing/supply capability in 2022 was 50,000 electric-vehicles in 2022. The decreased manufacturing outlook, which is very essential for EV corporations that lack earnings, sends Rivian Automotive’s inventory right into a tailspin. Lucid Motors (LCID) inventory reacted equally after the corporate decreased its manufacturing forecast.

Rivian Automotive’s inventory fell as a lot as 12% on Friday, however recovered a few of its losses later within the day. However, the inventory completed 6.4% decrease. RIVN is now buying and selling 47% under its IPO value of $78 and set a brand new 52-week low yesterday.

RIVN Share Price

RIVN Share Price (Finviz)

Pre-Order Update

In December, Rivian Automotive obtained 71,000 pre-orders for its R1 fashions. In its shareholder letter yesterday, the corporate supplied an replace on its pre-order standing, stating that Rivian Automotive added 12,000 new pre-orders within the final three months. Rivian Automotive had 83,000 R1 pre-orders from the U.S. and Canadian markets as of March 8. R1 pre-orders embody all R1T vans and R1S SUV reservations.

The Ultimate Value Play In The EV Industry

Rivian Automotive obtained $13.5 billion in web proceeds from its fourth quarter IPO, and the EV firm ended the yr with $18.1 billion in money and money equivalents. Rivian Automotive at present has a market capitalization of $37 billion, implying that money and money equivalents account for roughly half of the corporate’s market worth. This is an especially excessive margin of security for traders, and it’s just about unparalleled within the electric-vehicle business.

Consolidated Balance Sheet

Consolidated Balance Sheet (Rivian Automotive)

High Levels Of Cash Limit Risks

With practically half of Rivian Automotive’s market valuation locked up in money, the inventory’s threat at this level is extraordinarily low, though operational headwinds shouldn’t be neglected.

Yes, inflation and provide chain points are affecting Rivian Automotive’s manufacturing forecast this yr, however these are more likely to have a short-term influence and won’t change the corporate’s long-term prospects within the EV business. Pre-orders proceed to be sturdy, and curiosity in Rivian Automotive’s fashions is rising.

My Conclusion

The decreased manufacturing forecast for 2022 was sudden, however it isn’t a significant problem. Production and supply will merely be pushed slightly additional into the longer term.

Investors also needs to take into account that Rivian Automotive can produce twice as many electric-vehicles in 2022 because it projected in its manufacturing forecast, so if the provision chain works higher later this yr, the EV firm may scale a lot sooner than at present anticipated.

Rivian Automotive is at present among the finest offers within the EV business resulting from its excessive money worth relative to market capitalization.

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