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Can Rivian shares drive back up towards their $78 IPO price post-earnings?

Up-close image of the Rivian logo on a car

When electric pickup truck and SUV maker Rivian [RIVN] reports its second quarter earnings on 11 August, the focus is expected to be on whether it will need to revise its full-year guidance amid inflation and supply chain disruptions.

The Rivian share price has fallen sharply since the company’s debut on the Nasdaq last November. Its valuation has almost halved since then, with the shares falling to $38.09 at the close on 8 August, versus a list price of $78.

“That $78 IPO prices seems a long time ago now, with major stakeholders Ford [F] and Amazon [AMZN] taking huge write-downs on their stakes in the business over the past six months,” our chief market analyst Michael Hewson explained.

While the company’s share price has managed to recover from a 52-week low of $19.25 on 11 May, the company is struggling to ramp up production amid rising raw material prices and supply chain constraints.

Analysts expect losses amid supply issues

At the end of July, the electric vehicle (EV) automaker announced that it would lay off 6% of its workforce, while also simplifying its product plans in an attempt to cut costs.

“We need to be able to continue to grow and scale without additional financing in this macro environment. To achieve this, we have simplified our product roadmap and focused on where it is most impactful to deploy capital,” announced Rivian CEO RJ Scaringe in a memo seen by Bloomberg.

Ahead of the company’s upcoming interim announcement, there are concerns that these ongoing supply issues and rising costs will weigh on earnings. Analysts are expecting Rivian to report an earnings loss of between $1.51 and $1.79 per share, with a consensus of $1.67 per share, according to Zacks Investment Research.

Wedbush analyst Dan Ives isn’t concerned by the recent layoffs, however. Rivian is showing Wall Street that it can tighten its financial belt, he told CBS News. “They’re cutting costs because they're reading the room and following what's happening at Facebook [META], Microsoft [MSFT], Apple [AAPL] and Tesla [TSLA].”

Production exceeded Q2 target

The cost-cutting measures could help the company improve on its first quarter results. The Rivian share price dropped to a record low on the day of the Q1 earnings announcement as the company reported that, for the three months to the end of March, revenue came in at $95m, below expectations of $131.2m. The company also reported a loss before tax of $1.6bn, or $1.43 a share, up from a $414m loss in the year-ago quarter.

In Q1, the company built 2,553 vehicles and delivered 1,227. Sticking with plans to ramp up production, bosses reaffirmed their target to produce 25,000 vehicles this year. A slow step up in production towards the end of Q1 led management to express confidence that it would produce 4,000 vehicles in the second quarter.

In July, the company confirmed that it had exceeded this target, having produced 4,401 vehicles during Q2 and delivered 4,467.

Rivian investing in production capacity

Although Rivian was confident back in May that it could produce 25,000 vehicles by the end of the year, it will be interesting to find out whether the company still stands by this target. The Q2 earnings announcement on 11 August could see this goal revised downwards in light of raw material price increases and supply chain issues.

The company reported 10,000 new vehicle reservations since it hiked prices in March, suggesting that demand remains strong.

In order to meet rising demand for EVs, Rivian has been investing heavily in expanding its production capacity. “It has spent significant amounts on increasing its capacity, including plans to build a second factory in Georgia, which should cost in the region of $5bn, although it has secured $1.5bn in tax incentives. The question is whether there was a rise in capital expenditure in the second quarter to mitigate inflationary pressures,” Hewson explained.

In light of the costs associated with expanding capacity, the company has a 2022 adjusted EBITDA guidance of negative $4.75bn and capital expenditure guidance of $2.6bn – up from $1.8bn in fiscal 2021.

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