Rivian Shares Jump 10% After Reaffirming Production Guidance, But Here's Why Analysts Remain Skeptical

Rivian Automotive Inc RIVN shares traded higher by 13.2% on Wednesday after the company reported impressive production and delivery growth in the second quarter.

Rivian produced 4,401 vehicles and delivered 4,467 vehicles in the second quarter. Compared to the first quarter, the second-quarter numbers represent 264% sequential sales growth and 72% sequential production growth.

In addition, Rivian said it is on track to deliver 25,000 vehicles in 2022, in line with its previous guidance disclosed in its first-quarter earnings report.

Related Link: Nio Analyst Dismisses Short Seller Allegations: Why They're Bullish On Chinese EV Stock

Even after Rivian's big Wednesday morning rally, the stock is still down 70.5% year-to-date. The updated guidance is reassuring to investors that Rivian is effectively ramping up its business, but Wall Street had initially expected closer to 40,000 vehicle deliveries for Rivian in 2022.

Voices From The Street: On Wednesday, D.A. Davidson analyst Michael Shlisky said the updated guidance numbers are bullish for Rivian and should support the stock in the near term, but his longer-term skepticism has little to do with near-term production guidance.

"RIVN's R1T, R1S, and EDV vehicles are being launched into what is arguably the three most hotly-contested EV markets, and market segments overall," Shlisky said.

Related Link: Twitter Board Unanimously Approves Musk Buyout: What Happens Next?

He said Rivian will still need to double its production rates in the second half of the year just to meet its current guidance. In addition, Shlisky said Rivian has yet to demonstrate a profitable business model and may be forced to raise additional capital via dilutive equity offerings or other forms of debt.

D.A. Davidson has an Underperform rating and a $24 price target for Rivian.

CFRA analyst Garrett Nelson said the fact that second-quarter volumes were in-line with expectations is good news, but Rivian will need to operate at much higher utilization rates to hit its targets for the second half of the year. At the same time, CFRA is still calling for heavy EPS losses for Ruvian of $6.40 in 2023 and $5.20 in 2024.

"Despite expectations for losses for the foreseeable future, the company was sitting on close to $15B of net cash at the end of March (nearly 60% of its market cap), which should provide it with a greater degree of flexibility versus other EV startups as it continues to ramp production," Nelson said.

While Rivian continues to ramp its production and push toward profitability, Nelson said the stock will likely continue to trade at a discount relative to other auto manufacturers.

CFRA has a Hold rating and a $28 price target for Rivian.

Photo: Shutterstock