By Stephen Wilmot
Rivian will keep investors on edge as long as it keeps burning through their cash.
The electric-vehicle makers shares are down 6% premarket following underwhelming results published after the market closed on Tuesday.
On the plus side, the company said it wouldnt need to spend as much on plant and machinery this year as it expected a quarter ago. It also stuck to its production and profit guidance.
But a lower capital-expenditures bill was expected after Rivian said in March that it would start by building next-generation vehicles at its existing assembly plant in Normal, Ill., rather than at a new site near Atlanta. And the production guidance, which implies no growth this year, was a huge disappointment when the company first gave it in February.
Rivians first-quarter numbers themselves werent great. The company drained $1.5 billion of cash, much more than expected. It has about $7.9 billion left, including short-term investments, crudely giving it about five quarters before it runs out of funds at the current rate of cash burn. The second quarter will be expensive, too, given that the company shut down its factory in April for upgrades.
The promise is that cash flows should then get better. Rivian expects to turn a gross profit in the fourth quarter. If that happens, and if it is sustained in 2025, selling more vehicles will reward the company rather than simply adding to its bills.
But getting to the point of positive free cash flows is the more crucial milestone. Analysts dont expect it for at least another three years, according to FactSet.
For Rivian, success depends on both flawless execution of its plan and improving consumer sentiment toward EVs. In a sign of how the wind has turned against Rivians chosen technology, hybrid pioneer Toyota reported a record $32 billion in annual profit Wednesday.
One wildcard: A report in Taiwanese daily Digitimes that Apple might be in talks with an EV maker briefly jolted Rivians stock higher at the open Tuesday. When asked about the rumors on its quarterly earnings call, Rivian founder RJ Scaringe talked about the companys digital operating system and opportunities for partnership.
This could be a positive development, but it doesnt sound transformational. Rivians only path forward can be showing investors that it no longer needs their money.
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(END) Dow Jones Newswires
May 08, 2024 08:00 ET (12:00 GMT)
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