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Is Rivian Automotive Inc. Running Out of Power or Charging Up for a Rally?

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs

Is Rivian Automotive Inc. Running Out of Power or Charging Up for a Rally?

Excitement around Rivian Automotive Inc. continues as the company’s innovative new EV models and recent expansion into international markets capture investor attention. Reports suggest that Rivian’s advancing technology and strategic partnerships are boosting its market profile significantly. Consequently, Rivian Automotive Inc.’s stocks have traded up by 3.98 percent on Friday, reflecting growing confidence in the company’s future prospects.

The latest developments in Rivian

  • Los Angeles Auto Show 2024 highlights Rivian among top automotive brands, featuring test drives of their electric vehicles.
  • CFO Claire McDonough represents Rivian at the 2024 Goldman Sachs Communacopia + Technology Conference, sharing insights at a fireside chat.
  • Morgan Stanley downgrades Rivian’s rating from Overweight to Equalweight, with price targets dropping to between $13 and $30.
  • Premarket activity sees Rivian in the green with a 1.7% premarket increase.

Candlestick Chart

Live Update at 13:26:37 EST: On Friday, September 27, 2024 Rivian Automotive Inc. stock [NASDAQ: RIVN] is trending up by 3.98%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Has Rivian Beat Expectations or Left Investors Wanting More?

Rivian Automotive Inc. has had a rollercoaster of a time in the markets lately. The recent jump of 1.7% in premarket activities might seem like a beacon of hope, but let’s not get ahead of ourselves. Being showcased at the Los Angeles Auto Show 2024? That’s no small feat. Imagine it—rows of gleaming cars, auto enthusiasts buzzing around, and amidst all this, Rivian stands tall, offering test drives of its electric vehicles. Now, that’s the kind of publicity most companies dream of getting. It’s not just visibility, it’s credibility.

Yet, amidst this visible success, there are shadows too. Nothing screams reality check louder than a downgrade from a heavyweight like Morgan Stanley. Their shift from Overweight to Equalweight is like finding out your favorite movie got a lukewarm review—it doesn’t kill the vibe but it sure cuts through the hype. At the heart of it, this downgrade reflects tangible concerns, pushing their price target down to between $13 and $30, a sobering contrast when paired with Rivian’s recent price at around $11.50.

Adding another layer to this financial tapestry is CFO Claire McDonough’s presence at the esteemed 2024 Goldman Sachs Communacopia + Technology Conference. The value here? Investors and industry watchers gain firsthand insights into Rivian’s strategy and financial health. It’s akin to an artist explaining the brush strokes of their masterpiece—it gives depth and context. Speaking of depth, recent financial data reveals Rivian wrestling with a gross margin of -41.1% and a hefty net income from continuous operations pegged at -$1.457 billion. That’s a significant chunk of the story right there.

Latest Earnings Report and Financial Metrics

Now, let’s dive deeper into Rivian’s recent earnings report. This last quarter showcased both promise and peril. With revenue clocking in at $1.158 billion, you’d think it’s a positive story. But, juxtapose that with a total expense of $2.533 billion, and it paints a stark picture. The company’s Gross Margin was a concerning -41.1%, a tight corner indeed. It’s like baking a cake with a perfect recipe but ending up with half the cake missing. Their profitability ratios tell a tale that’s even bleaker. A Pre-tax Profit Margin of -239.9% and a Return on Assets of -37.37% don’t scream investor confidence.

Further dissecting their financial strength, Rivian’s current ratio sits at an impressive 5.3. This means the company can comfortably cover its short-term liabilities, hinting at decent financial health. The total equity, ringing in at $6.818 billion against total liabilities of $8.536 billion, also leans positively. But it’s essential to look at the long-term picture. Rivian’s long-term debt is a mammoth $5.877 billion. It’s like having a swanky ride but a hefty loan hanging over it.

The cash flow from operating activities, pegged at -$754 million, highlights a crucial challenge. Free Cash Flow being in the red to the tune of over $1 billion illustrates the burn rate. Yes, they raised $1 billion in long-term debt which shows fiscal action, but the dependency on external liquidity is a worrying sign. A mixed bag, wouldn’t you agree?

More Breaking News

Rivian’s Conference Highlights

Both the Goldman Sachs Communacopia and Morgan Stanley’s Laguna Conference were platforms that not only highlighted Rivian’s roadmap but also exposed the hurdles. The dialogue at the fireside chat underscored Rivian’s vision, both in tech and market.

The catch here? While these events amplify visibility, they also highlight glaring concerns, like the squeeze on margins and profitability. It’s a public reveal, almost like an artist presenting a half-finished painting—there’s potential but the flaws are visible.

Key Insights and Speculations

Looking at the data through a more granular lens, the valuation measures tell an insightful story. Rivian’s Price to Sales ratio sits at 2.25, not entirely damning but not particularly rosy either. Diving into their Management Effectiveness, the Return on Equity at a disheartening -67.04% is a red flag. It’s like racing with a flat tire—you’re not out but you’re undeniably handicapped.

The tech and auto nerds at the Los Angeles Auto Show eyeing Rivian’s sleek electric models might feel the spark of optimism. Yet, the broader financial metrics can’t be ignored. The balance sheet strength is decent and the current ratio at 5.3 suggests they can handle their short-term debts, but the long-term, well, it’s murkier.

How do these conferences and downgrades impact market sentiments? For one, Rivian showing up at these industry events boosts their reputational capital. Investors and market watchers take note, assessing Rivian’s trajectory and aligning it with broader economic trends. At the same time, Morgan Stanley’s downgrade slices through the optimism, realigning expectations with a dose of reality.

What Does This All Mean For Investors?

  • Product Visibility and Market Presence: The Los Angeles Auto Show has undoubtedly enhanced Rivian’s market presence. Crowdsourcing the wow factor through live test drives does wonders for brand affinity.
  • Financial Prudence vs. Market Expectations: Morgan Stanley’s downgrade is a significant indicator. It’s a cautionary signal, urging investors to recalibrate expectations based on the sobering financial metrics.
  • Strategic Financial Moves: The conferences serve a dual purpose—they are not just a marketing exercise but platforms where Rivian can interact with major stakeholders, gauge investor sentiment, and hint at future strategies.

So, what’s the takeaway here? Rivian stands at a crossroad.

Does it elevate itself through strategic innovation and financial discipline or does it falter under the weight of its ambitions? Investors need to weigh the visible excitement against the hard financial realities. Rivian has the tech prowess and brand visibility, but it needs to balance that with fiscal prudence and sustainable growth. An uptick in premarket activities is encouraging, but it is just the first step in a long journey. Stay tuned, for Rivian’s road ahead is bound to be an engaging ride.

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”