The Rivian Market Is About To Shift Into A Higher Gear

Key Points

• Rivian had a solid quarter supported by ramping production. 
• Production and deliveries topped estimates and led the company to raise guidance. 
• The stock shows signs of a classic bottom and reversal that could take the market to new highs. 

The Rivian NASDAQ: RIVN market hit bottom and shifted into reverse earlier this year. With production ramps moving along nicely and the Q2 results above expectations, the market for this stock is about to shift into a higher gear. The recent pullback in the price action confirms support at a critical level and suggests the uptrend will continue.

The analysts have hesitated to update their price targets; only 1 fresh revision is showing up on Marketbeat.com’s analyst tracking page. However, it is a boosted price target tied to a Buy rating, and all the chatter is positive. 

Among the takeaways from the analyst chatter is that cash burn is coming under control. This resulted in a narrowing loss aided by leverage. Leverage is coming into play due to production ramps, supply chain normalization, and cost reductions that point to continued improvements as the year progresses. Wedbush’s Dan Ives, who said the company was at an inflection point after the Q1 release, said the Q2 results are a “step in the right direction.”

Other analysts view the new production targets, up 400 basis points compared to the Q1 guidance, are achievable and perhaps even cautious. 

Regardless, the community of 16 analysts tracked by Marketbeat has the stock pegged at a weak Moderate Buy with a price target about 13% above the pre-release action. The freshest target came out after the release, another 700 basis points above that, and gives additional evidence the bottom in analysts' sentiment is in, and they now provide a tailwind to the market.

The consensus estimate is down about 50% compared to last year but up compared to last quarter and last month, with sentiment among analysts improving. 

Rivian Has Solid Quarter As Production Ramp Gains Traction 

Rivian posted a solid quarter for Q2 with revenue of $1.12 billion, growing 207.7% compared to last year and beating the consensus by 1100 basis points. The strength was driven by an acceleration in production and a ramp in deliveries, with production up 50% YOY and delivered at 12,640.

The strength is largely due to the increased production of motors, which allowed for 100% coverage of the R1 fleet and the addition of a dual-motor option. 

Among the good news is an improvement in the margin at all levels. The company’s vehicle margin improved substantially due to volume leverage and is on track to outperform the consensus targets for the year.

The company is still operating at a loss, but total losses fell by 30% and are expected to shrink as production ramps and SG&A expenses are managed. The $1.08 in adjusted losses is $0.31 better than expected, and the guidance suggests that these strengths will persist and even improve in Q3 and Q4, with production targets up to 52,000 from the prior 50,00.

Losses improved, but the cash burn increased by 13% YOY. The offsetting factor is that cash burn is tied to an inventory increase that includes raw materials and finished goods due to the production ramp.

The takeaway from the balance sheet is that the company has more than $10 billion in cash and equivalents and $11.3 billion in total liquidity, which should see it through the next few quarters at least. 

The Technical Outlook: A Textbook Reversal For Rivian

The Rivian market is showing a classic bottom and reversal. The market hit bottom earlier this year, moved above critical resistance over the summer, and confirmed support and the uptrend following the Q2 release. Assuming the market follows this signal, this stock should continue higher. The next level for solid resistance is near $27.50; a move above there would be bullish.