Rivian Automotive (RIVN -1.73%) has been a polarizing inventory. The bulls praised the maker of electric pickups, SUVs, and shipping and delivery vans for creating a lot more cars than lots of other fledgling electric powered automobile (EV) makers, and famous that its preorders ongoing to increase. The bears will point out that Rivian currently halved its production focus on for 2022 from 50,000 to 25,000 autos again in March, it really is however struggling with provide chain constraints, and its web losses are widening.
Judging by the inventory selling price, the bears have clearly been winning that argument: Rivian’s inventory is down about 85% from its all-time superior past November, and it remains practically 70% beneath its IPO share price tag of $78. It might be tempting to invest in Rivian inventory at these depressed ranges, but a few recent purple flags point out it could nevertheless be too early to bet on its long-term recovery.
Picture source: Rivian.
Pink flag 1: A significant recall
In early Oct, Rivian issued a voluntary remember of 13,000 automobiles — which accounted for most of the 14,317 automobiles it experienced generated in the first 9 months of 2022 — to examine most likely free fasteners that could bring about a reduction of steering control less than “unusual situations.” Rivian taken care of the remember swiftly with free of charge company appointments and loaner autos, but it solid doubts on its means to safely obtain its comprehensive-yr generation target of 25,000 cars.
All through Rivian’s most current meeting call on Nov. 9, CEO RJ Scaringe reported it had previously checked “above 83%” of its vehicles for the defect, and that its customers mainly appreciated the firm’s “transparency” in handling the condition.
Purple flag 2: Allegations of safety violations
In late November, a dozen of Rivian’s personnel submitted safety complaints with the U.S. Occupational Safety and Wellness Administration in regard to the function situations at its primary producing plant in Regular, Illinois. Those people allegations involve a lack of critical security devices like respirators, the intentional salvage and use of destroyed electrical components, and different workplace accidents. The plant also lately suffered a bedbug infestation.
Together with the aforementioned remembers, these allegations counsel that Rivian’s production abilities are remaining stretched to unsafe and unsustainable stages. In a assertion, Rivian pointed out that the 12 personnel only represented a very small proportion of the plant’s workforce of 6,700, and it was concentrated on “building a protected and inspiring” environment for all its workers.
Purple flag 3: Pausing its joint undertaking with Mercedes-Benz
Back in September, Rivian declared a joint enterprise with Mercedes-Benz to deliver electrical vans in Europe. Lots of investors most likely observed that partnership as another vote of confidence for Rivian’s EV systems. But on Dec. 12, Rivian announced it would pause that joint enterprise to concentrate on strengthening its core businesses and hard cash flows in the U.S.
That strategic shift would make perception, because Rivian nonetheless needs to supply 100,000 electric powered delivery vans to Amazon, its biggest trader, and fulfill its preorders for additional than 114,000 R1 autos. It truly is intelligent to prioritize these orders in excess of an expansion into Europe, but Rivian’s inventory even now stumbled in response to that unforeseen announcement.
Will these pink flags push absent the bulls?
Rivian is nonetheless keeping up a great deal much better than other young EV makers like Lucid, which only expects to provide 6,000-7,000 cars this yr, and Canoo, which has not shipped a one vehicle still. But it can be unquestionably not in the exact league as Tesla, which shipped 936,172 autos past 12 months.
Rivian is nevertheless a speculative stock that trades at 13 situations this year’s revenue (assuming it can basically supply those 25,000 motor vehicles), and it will remain unprofitable for the foreseeable potential. In brief, it will very likely stay out of favor as lengthy as rising desire fees proceed to travel investors toward a lot more conservative investments. Even Tesla, which trades at 6 occasions this year’s product sales, seems like a a great deal safer bet on the EV industry than Rivian suitable now.
John Mackey, CEO of Whole Food items Current market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sunshine has positions in Amazon.com. The Motley Idiot has positions in and endorses Amazon.com and Tesla. The Motley Idiot has a disclosure coverage.
