- Wall Street's expectations for electric vehicle start-up Rivian Automotive are incredibly high following its blockbuster IPO last month.
- Whether Rivian can live up to the hype will begin Thursday after the markets close when the automaker reports its first quarterly financial results as a public company.
- While Rivian has given some earnings and production guidance as part of its IPO, investors will concentrate on any updates or changes to its plans.
Wall Street analysts have set a high bar for EV start-up Rivian Automotive following its blockbuster IPO last month, comparing CEO RJ Scaringe to Superman and saying the company's "the one" capable of challenging Tesla.
Whether Rivian and Scaringe, who does resemble Clark Kent, can live up to the hype will begin Thursday after the markets close when the automaker reports its first quarterly financial results as a public company.
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While Rivian has given some earnings and production guidance as part of its IPO, investors will concentrate on any updates or changes to its plans. Specifically, vehicle production, consumer deliveries and pre-orders of its first electric vehicles.
The company's revenue and financial results are less relevant at this point, as it attempts to ramp-up production of three products simultaneously at its plant in Normal, Ill. Its first EVs are the R1T pickup and R1S SUV for consumers and a commercial delivery van for Amazon.
Overall, Wall Street analysts are cautioning investors to expect some growing pains for Rivian, but they predict the company will successfully navigate such challenges and establish itself as a worthy competitor against Tesla and others in the EV industry.
"Auto investors who missed Tesla have struggled to make the case for legacy OEMs and a raft of de-SPAC EV start-ups over the past 12 months," Morgan Stanley's Adam Jonas wrote in an investor note last week initiating Rivian at overweight with a $147 a share price target. "While risks remain, we believe Rivian has all the key attributes to be 'the one' that won't get away from your EV portfolio."
Morgan Stanley's price target is in line with the overweight rating and target price of $134.08 a share based on 15 analysts compiled by FactSet.
Here's more on the Rivian's plans and what investors should know ahead of its third-quarter results Thursday after the bell.
Rivian is a growth story. Like many speculative EV start-ups, Rivian is a bet on its future, not its current financials. It only started producing the R1T pickup in September, and has delivered few of the trucks and mostly to employees.
The company expects capital expenditures of about $8 billion through 2023, with some analysts such as BofA Securities' John Murphy forecasting Rivian won't turn am operating profit until at least 2025.
For the third quarter, Rivian last month estimated operational losses of between $745 million and $795 million and a net loss of between $1.21 billion and $1.28 billion. It forecasted its quarterly revenue to be about $1 million.
Murphy, in an investor note last week, said the company's "near-term business success will be measured by orders and production trends" rather than financials.
Wall Street is particularly concentrating on Rivian's reservation numbers as a barometer of demand.
Rivian disclosed to investors last month that it has a backlog of pre-orders for 55,400 R1T and R1S vehicles from customers in North America and plans to deliver these by the end of 2023.
Aside from its consumer pre-orders, any increase or pull ahead of Rivian's plans to deliver commercial vans to Amazon could be positive for the company's stock.
Amazon, which is the largest stakeholder in Rivian at 20%, has pre-ordered 100,000 electric vans from the start-up that are expected through 2025.
Morgan Stanley's Jonas said he believes Amazon's order amount could be "stale" and "be significantly higher over time."
Rivian's plan to launch and ramp-up production of three vehicles simultaneously would be daunting for an established automaker, let alone a start-up. That's where Superman comes in.
"Rivian needs to ramp quickly and effectively to materialize as a serious long-term contender. That is, Clark Kent (R.J. Scaringe) needs to emerge from the phone booth as Superman soon to scale Rivian and save the plane," Baird Equity Research analyst George Gianarikas told investors in a note.
Rivian has said it expects to deliver about 1,000 R1Ts, 15 R1S SUVs and 10 delivery vans to Amazon in 2021.
Analysts said investors shouldn't expect a perfect production ramp-up curve, but one that's slow and steady for the time being with some bumps along the way.
RBC Capital Markets' Joseph Spak said that "while there will undoubtedly be some hiccups along the way," he predicted Rivian will hit its production targets, growing at a compound annual rate of 52% by 2030.
"This trial by fire approach can help forge Rivian's DNA setting it up for future success," he said in an investor note.
Any announced delay to its product timeline could be a negative in the short term for investors, but also a positive in the long-term. The sooner automakers work out production and quality problems before scaling manufacturing, the better.
Rivian previously said it expected to begin producing both the R1S SUV and Amazon vans by the end of this year at its Illinois factory.
Aside from typical problems of ramping up vehicle production, the automotive industry also is experiencing significant supply chain issues that could set Rivian back in the near-term.
"Rivian is still in the early stages of its ramp, and while the company has a team with industry veterans, the supply chain environment remains challenging," Goldman Sachs' Mark Delaney wrote in an investor note.
While Rivian's relationship with Amazon is viewed as a positive, its relationship with Ford Motor, which has a roughly 12% stake in the company, is a bit more complicated. It's something investors have been watching.
What started out as a friendly collaborative relationship between the established automaker and start-up has appeared to turn strictly financial with the sides ending joint development plans for a vehicle and Ford giving up a seat on Rivian's board.
Ford CEO Jim Farley, while congratulatory to Scaringe, has called Rivian a competitor.
It's unclear how long Ford plans to retain its ownership stake in Rivian.
-- CNBC's Michael Bloom contributed to this report.