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About Rivian

We have previously discussed both one of Rivian’s most threatening competitors as well as Rivian itself.

If you didn’t click on the links above, you still might be having a little trouble figuring out what it is Rivian actually does, aside from having a cool name.

Headquartered in Irvine, California, Rivian is an electric vehicle (EV) manufacturer and seller that specializes in pickup truck and sport utility vehicle (SUV)-styled electric vehicles.

While the company doesn’t have nearly as much market share in the electric vehicle space as its most formidable foe, Tesla, its pickup trucks and other vehicles sure do look cool. 

That makes up for it, right?

The company also has operations and facilities scattered in and around the United States in regions such as Normal, Illinois, Wittman, Arizona, Vancouver, British Columbia among a few other locations.

In addition to being a competitor going up against Tesla and other various EV manufacturers, what piqued our interest was the fact that Rivian has established a promising partnership in delivering electric delivery vehicles for the world’s largest e-commerce company as well as one of the world’s largest logistics companies, Amazon.

This caught our eyes because, candidly, we have a negative predisposition for companies that just sell vehicles, as we think the margins tend to be far too thin, the market is brutally competitive and even during times of economic expansion and prosperity, manufacturing vehicles and operating within the landscape is far from an easy task, as there are always troves of operational headaches waiting around the corner.

That being said, the main reason we like Rivian’s partnership with Amazon is that it provides the company a customer that is still growing at a rapid pace and will also likely see heightened demand for Rivian and its delivery vehicles moving forward.

Lastly, as it relates to Amazon, the company itself reportedly has somewhere in the neighborhood of a 20% stake in Rivian, indicating, at least from our perspective, that Amazon has a clear vested interest in the long-term efficacy, growth and success of Rivian.

All things considered, Rivian is a cool company that operates in a viciously competitive industry but has a luxury in having a technological and logistical powerhouse such as Amazon backing it and its operations.

Let’s get to the good stuff, Rivian’s finances.

Rivian’s stock financials

To get things kicked off, Rivian’s share price (NASDAQ: RIVN) has fallen off of a cliff since its initial public offering (IPO) in November 2021, plunging since then around 85%. 

Initially, we viewed this massive decline as more of a result of going public when stocks, particularly technology stocks, were getting clobbered with headwinds aplenty. However, this share price decline may very well be justified from an internal perspective. 

Primarily, although the company is a relatively new, sleek company with a few solid established partnerships, operationally it might need some work and thus the decline in share price is more than justified.

Either way, some due diligence never hurts.

Let’s get to know the company’s financials a little better and see whether its share price decline was the market’s fault or more so Rivian’s fault.

Trading at a share price of just under $17, Rivian has a market capitalization of $15.69 billion and, to no surprise, no readily available price-to-earnings (P/E) ratio and no annual dividend listed for its shareholders.

Big or small, cash burn is very real within the automobile and broader vehicle industries, EV or not.

To us, this is the most likely reason Rivian doesn’t issue annual dividends or have a displayed price-to-earnings ratio, which, frankly, is fine with us given the nature of the vehicle sector.

This company, especially as it is a younger EV company, needs to retain and reinvest as much cash as it possibly can in order to continuously innovate and fine tune its current product offerings all while tending to its operating costs, which can fluctuate greatly, so as to control them and not let them eat the company alive, which would be very easy to let happen in this industry.

It’s just reality.

Digging a bit deeper into the company’s financials, Rivian’s executive team is responsible for around $22.3 billion in total assets as well as approximately $2.8 billion in total liabilities, according to its balance sheet.

We thought we’ve seen everything and we like to think that we are fairly good at predicting financial figures of companies within certain industries.

But we were a little off in our predictions regarding Rivian’s overall balance sheet structure and we’re certainly comfortable admitting that.

While the fact that the company’s total assets outweigh the value of its total liabilities by around eight times over is immensely impressive in its own right, we view this as the company being well prepared for future organic growth and product expansion.

This balance sheet gives Rivian a fighting chance in pretty much, from our vantage point, many of the tumultuous market conditions that are to come.

Suffice it to say, this company’s balance sheet is serious and undoubtedly one for the books, at least, for now.

Now onto the company’s income statement, as it is a massive hint as to why Rivian’s balance sheet is so fortified at the moment.

Rivian has apparently had no total revenue to report over the last handful of years, including 2019 and 2020, however, the company did report total revenues in the following year of $55 million.

Not trying to sound like income statement snobs, but to us, this is sort of a piddly amount for this company to report in its most recent year of revenue generation.

We would’ve assumed with its partnerships with Amazon as well as its consumer sales (pickup trucks, SUVs etc..) that the company would have more revenue to report.

This is likely why the company’s balance sheet is as stellar as it is; Rivian hasn’t had to incur as much by means of debt or total liabilities given that they haven’t made much in terms of sales and thus haven’t had to accumulate the associated operating costs.

Nevertheless, we’re stoked that Rivian has put together a great fundamental base to leap and grow off of in the future.

As it pertains to the company’s cash flow statement, the cash burn has been substantial as expected.

Thankfully for us and unfortunately for Rivian and its current shareholders, we were right on this one.

Specifically, Rivian’s net income in 2019 was reported as -$426 million, a tad more than -$1 billion in 2020 and its latest reported figure of around -$4.7 billion, as reported in 2021.

Given these figures and their relevance to the ones mentioned prior, it seems like Rivian has spent much or most of its capital thus far in building out its factories and the machinery within the facilities, not to mention the vehicles it manufactures and sells.

Although we consider this to be fairly normal for a company in Rivian’s stage and the market within which it operates, we’re worried that there isn’t an end in sight.

This deepening negative trend in net income will likely taper down (although will still remain negative for quite some time, we presume) over time, however, if this company’s revenue roars in the coming years, which we sure hope it does, the expenses provoked in the process could potentially drench this company into debt to possibly a point of no return.

This is our main short-term and long-term concern with Rivian.

It doesn’t seem like it would take much for this company to swiftly become overleveraged.

Nevertheless, it will take time for this company’s management team to prove that it can properly accumulate, allocate and deploy debt, however, our primary point is that if they aren’t, things could go south for Rivian expeditiously. 

Rivian’s stock fundamentals

Obviously, net profitability on a trailing twelve month (TTM) basis isn’t going to look very pretty for Rivian at this current juncture.

According to TD Ameritrade’s platform, the company’s TTM net profit margin is a whopping -714.01%, compared to the industry’s average of a far more pleasant -15.32%.

Normally, we’d gasp and writhe in disgust, but taking into consideration all of the previously mentioned figures and macroeconomic factors along with the current state of the company’s total annual revenues, we’re far from shocked.

Nevertheless, we are concerned with the amount of revenue that this company will have to generate relative to the amount of cash it’ll have to burn through just to get even close to becoming net profitable on an annual basis.

Lastly, Rivian’s TTM returns on assets and investment are both atrociously low at the moment as well. 

For example, according to TD Ameritrade’s platform, Rivian’s TTM returns on investment is presently pegged at -61.51% to the industry’s average of 15.98%.

As bad as it is, it does objectively make sense on our end given the aforementioned factors, variables and realities of the electric vehicle sector and its relation to the macroeconomy.

Should you buy Rivian stock?

Let’s push the numbers, metrics and other relevant financial figures to the side for just a moment.

We see a very, very large market for Rivian in the commercial vehicle space.

Specifically, given that Amazon reportedly owns around 20% of the company, we think there is a relatively small possibility that the company will actually wholly acquire Rivian given the operational headache that would follow.

If Amazon doesn’t fully purchase Rivian, we think the company in question, if it isn’t already, should aggressively pursue designing, manufacturing and selling vehicles to companies that deliver a lot, many of which are likely feeling and are on the verge of conceding to the global push for EVs. 

If there is cost efficiency to be had and the ability to receive a stamp of green approval to be had from the general public so as to boost the company’s environmental, social and governance (ESG) score, if Rivian played its cards right we think it could nab major, reliable, long-term, revenue generating contracts with logistics companies of all sorts.

Companies that instantly come to mind include the likes of the United States Postal Service (government contracts are great), FedEx, United Parcel Service (UPS), of course, Amazon and others branching into in-house delivery such as Domino’s Pizza, Walmart along with others such as The Coca-Cola Company, Kroger, PepsiCo, Ecolab, Cintas, Sysco, US Foods, Otis and many, many others.  

This is a huge, seemingly untapped market that we sure hope Rivian pursues so as to benefit itself and the rest of its shareholder base.

However, until there are tangible, public plans that the company is willing and able to attempt to practically own this space (mainly because Tesla doesn’t own it and Rivian, from our vantage point, isn’t ever going to pass up Tesla in the electric automotive space), we’re not awfully interested in this company and its stock.

Given the state of its net income according to its cash flow statement, its considerable distance from trailing twelve month net profitability and the naturally thin margins within the overall vehicle manufacturer and sale space, we feel most comfortable giving Rivian’s stock a “sell” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.