TLDR:
- Rivian’s Q3 2024 production and deliveries fell short of expectations due to component shortages
- The company lowered its FY24 production guidance by ~16%
- Rivian maintained its FY24 delivery guidance of 50,500-52,000 vehicles
- Achieving Q4 gross profit positivity is now considered unlikely
- Analyst opinions are mixed, with a Moderate Buy consensus and ~64% average upside potential
Rivian Automotive, the electric vehicle manufacturer, recently announced its third-quarter 2024 production and delivery figures, revealing some challenges in its operations.
The company reported producing 13,157 vehicles during the quarter, falling short of the 14,700 units analysts had forecasted. Deliveries also missed expectations, with 10,018 vehicles reaching customers compared to the anticipated 11,800.
The primary cause for these shortfalls was attributed to a component shortage affecting both the R1 and RCV platforms.
Rivian stated that this supply issue began impacting production during the quarter and has intensified in recent weeks. As a result, the company has been forced to lower its full-year 2024 production guidance by approximately 16%, or about 9,000 units at the midpoint.
Despite these setbacks, Rivian has maintained its full-year 2024 delivery guidance, projecting between 50,500 and 52,000 vehicles to be delivered to customers.
This commitment to the delivery target has provided some reassurance to investors, although concerns remain about the overall impact of the component shortage on the company’s operations and financial performance.
The unexpected nature and magnitude of the supply chain issues have caught both analysts and investors off guard. Truist analyst Jordan Levy noted that while Rivian had previously mentioned supplier issues related to a third-party component in their in-house Enduro motors, the extent of the impact was likely to surprise the market.
One of the key concerns stemming from this announcement is the potential effect on Rivian’s gross margin targets.
The company had previously set a goal of achieving positive gross profit by the fourth quarter of 2024. However, the lack of specific updates on this target in the recent announcement has led some analysts to speculate that reaching this milestone may now be unlikely in the near term.
The component shortage and its implications for production and gross margins could have a significant negative impact on Rivian’s share price. The stock has already experienced a challenging year, with shares down approximately 55% year-to-date as of early October 2024.
Adding to the uncertainty is the pending deal with Volkswagen, which is expected to bring in additional equity for Rivian. The lack of updates on the closure of this deal, combined with the production issues, has created a complex situation for investors to navigate.
Despite these challenges, analyst opinions on Rivian’s stock remain mixed. The current consensus among analysts is a Moderate Buy, with 11 Buy ratings, 9 Hold ratings, and 2 Sell ratings. The average price target stands at $17.24, suggesting a potential upside of about 64% from current levels.
Canaccord, while maintaining a Buy rating on Rivian shares, has lowered its price target to $28 from $30. The firm acknowledged the impact of the component supply issues on third-quarter production but noted that deliveries remain on track as management works through inventory to meet demand.
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