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This week, both Lucid Group (LCID) and Rivian Automotive (RIVN) will release their Q1 earnings. So far, 2024 has been yet another brutal year, to say the least, for startup EV companies, and both RIVN and LCID fell to new record lows earlier this year.
Wall Street analysts are not too bullish on Rivian stock heading into the Q1 confessional. While UBS upgraded the stock to “neutral” from “sell,” while keeping its $9 target price, the brokerage firm does not expect any recovery in the stock anytime soon, even as it sees the risk-reward looking more balanced after the crash.
Tesla Stock Soared After Q1 Earnings
Wolfe Research was even more unforgiving of Rivian, and listed the startup EV company as a short idea this earnings season. Also on Wolfe’s list was Tesla (TSLA), which soared following its Q1 report despite missing on both the top line as well as the bottom line.
Over the years, the Elon Musk-run company has built its reputation as a “short-seller killer,” and while the Tesla bears have had their victories, they have been on the losing side more often than not over the last five years - including after the Q1 earnings report.
Can Rivian now step into Tesla's role, and leave a burning hole in short sellers’ pockets with its Q1 earnings report? We’ll discuss this in this article.
RIVN Stock Forecast Before Q1 Earnings
Ahead of its earnings, Rivian has a consensus rating of “Moderate Buy” from the 24 analysts in coverage. Just over 54% of analysts rate the stock as either a “Strong Buy” or a “Moderate Buy,” down from nearly 70% three months back.
Rivian stock crashed after its Q4 report, and lost over a quarter of its market cap after the company said that it expects to produce 57,000 vehicles in 2024, which was slightly below 2023 levels and way below Street estimates.
While multiple brokerages lowered Rivian’s target price following the Q4 earnings, its current mean target price of $17.96 is 78% higher than Friday's closing price.
Rivian Q1 Earnings Preview
Analysts expect Rivian to post revenues of $1.17 billion in Q1 – a YoY rise of almost 77%. The automaker is expected to post a per-share loss of $1.38 in the quarter.
Startup EV companies have been saddled with perennial losses and cash burn, and despite taking several measures to lower the losses, Rivian is not expected to turn profitable anytime soon.
What Else to Watch in Rivian’s Q1 Earnings Report
During Rivian’s Q1 earnings call, apart from the usual financial metrics, I would watch out for comments on the following:
- 2024 delivery guidance: Rivian maintained its 2024 delivery guidance while releasing its Q1 delivery report last month, but I would watch out for any updates to the guidance, especially whether the company sees any upside (or downside) to the estimate.
- R2 reservations: Rivian could provide some updates on the reservations for its upcoming low-cost R2 model, which it unveiled in March. The company is now banking on low-cost models like R2 and R3 to revive its sagging growth, and I would look forward to more granularity on these during the upcoming earnings call.
- Capital requirements: During the Q1 earnings call, I would watch out for any comments on Rivian’s capital raise plans. Earlier this month, Rivian secured $827 million in funding in an incentive package from the State of Illinois for expanding its operations at the plant in Normal. While the funding is positive and Rivian stock soared after the news, it might still need to look at additional capital raises considering the ongoing cash burn.
Should You Buy or Sell Rivian Stock Ahead of Q1 Earnings?
I believe Rivian stock looks like a buy ahead of the Q1 report, as the YTD price action looks quite pessimistic, even amid the ongoing turmoil in the EV industry.
Rivian remains one of the better-funded EV startups, with cash and cash equivalents of $9.4 billion at the end of 2023. While the cash pile has been gradually coming down, a strong balance sheet has become a necessity rather than a privilege at a time when multiple startup EV companies risk going out of business. Rivian’s valuations also look reasonable; it trades at a next 12 months enterprise value to sales multiple of a mere 1.15x.
I would bet on a rally in Rivian following its Q1 earnings, as the stock's price action seems to factor in much more pessimism than warranted. We saw something similar with Tesla, and the stock staged a relief rally after the Q1 report as markets discovered that things were not as bad as feared. Could Rivian also achieve the same feat? Quite likely, I would say.
On the date of publication, Mohit Oberoi had a position in: RIVN , LCID , TSLA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
