Revenue +27%, loss narrows. Rivian posts its best quarter ever
On Thursday, July 30, after the close, Rivian $RIVN reported second-quarter results that looked like a dream come true for anyone who has been holding this stock since 2022. Revenue of $1.658 billion versus the expected $1.57 billion. Loss of $0.63 per share against a consensus of $0.78 according to TheFly's collection; other collections were expecting a loss of around $0.65. Adjusted EBITDA of minus $379 million compared to an estimated roughly minus $548 million. Gross profit of $179 million and a gross margin of 11%, both the best in the company's history. And on top of that, a raised full-year delivery outlook and a lower capex budget.
Key points
Record gross profit of $179 million. Software earned all of it; the cars were in the red.
Rivian beat estimates on revenue, EPS, and EBITDA. The stock dropped 9.6% the next day.
To meet its own guidance, it needs to deliver almost twice as many vehicles in the second half as in the first.
Free cash flow for the half-year: minus $1.9 billion. Cash on hand is $5.3 billion.
Volkswagen paid $308 million for the quarter. That's 60% of the entire software division.
The next day, the stock closed at $15.22, down 9.57%. In a single day, roughly $2.3 billion vanished from the company's market cap. Yet after the results, analysts mostly raised their price targets: Deutsche Bank from $23 to $24, TD Cowen from $20 to $21, RBC from $14 to $16, Wells Fargo from $15 to $16, and even Morgan Stanley, which keeps an "underweight" rating on the stock, lifted its target from $13 to $14.
So the market got better numbers than expected, analysts got better numbers than expected, and yet the stock dropped by a tenth. That doesn't happen by accident. Someone read something in the results that wasn't in the headlines.
And indeed, something is there. The consolidated gross profit of $179 million consists of two numbers pulling in opposite directions: the software and services division earned $215 million at a 42% margin, while the automotive division – the part of Rivian that builds and sells cars – posted a loss of $36 million. And even that loss is improved by items that have nothing to do with selling cars.
Rivian today is a $22 billion company that aims to deliver 65,000 to 70,000 vehicles this year. No one is buying it for what it earns this year. So how much of what has improved over the last five quarters actually comes from selling cars, and is it even physically possible to grow into today's price?