Startups have a long tradition of burning through cash before achieving profitability and their long-term growth potential.
When the company is in a capital-intensive industry such as auto manufacturing, the challenge can be an order of magnitude greater.
Such is the case for investors in Rivian Automotive (RIVN) as the electric vehicle maker confronts severe growing pains and weak fourth-quarter earnings.
But Real Money Columnist Stephen “Sarge” Guilfoyle is philosophical about the challenges, arguing that in the long run, Rivian will emerge as a major contender for consumers who want to acquire EVs.
“Rivian is one of three firms that will be competitors longer term in the EV space along with Tesla,” he wrote in a recent Real Money column. “Fortunately, Rivian has the balance sheet necessary to sustain these early growing pains.”
The automaker’s fourth-quarter earnings were dismal. Rivian reported a GAAP EPS loss of $4.83 per share, which missed consensus by $2.50 per share. The net losses tallied up to $2.46 billion with adjusted EBITDA at $1.11 billion. Rivian generated $54 million in revenue from the delivery of 909 vehicles since production only started last September.
One piece of good news is that Rivian has drawn the interest of consumers and has 83,000 pre-orders. But even that was harmed by a botched attempt to raise prices after the fact, a move that prompted sharp backlash and cancelations and forced the company to quickly backtrack.
Rivian has produced 2,425 vehicles since September, including 1,410 of them in calendar year 2022.
For the full year 2022, Rivian projects producing 25,000 vehicles, adjusted EBITDA of $-4.75 billion with capital expenditures of $2.6 billion.
Rivian’s balance sheet remains strong with a net cash position of $18.13 billion and current assets of $18.56 billion vs. current liabilities of $1.31 billion.
“Just as important is the key investment in the firm from corporate America,” Guilfoyle wrote.
The inability to increase production has been an issue, but Rivian has investors with deep pockets. Amazon (AMZN) currently owns a 20% stake in Rivian and has a standing order for 100,000 vehicles. Although Ford Motor (F) is in some ways a competitor, the automaker owns a 12% stake as well.
