Why Rivian Has A Reasonable Shot At Success

Peter Lynch said that one way to tell a stock’s success is by common sense.

Part of his theory was based on “only buy what you understand.” If you see long lines at a store, for example, there’s a good chance that the company is doing something right (think: In-N-Out burger in the U.S.). In other words, use your common sense as a research tool.

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One common sense tool I use to gauge the success of the parade of new EVs coming onto the market is their presence at charging stations and conversations — at those charging stations — with owners.

In the last 12 months, Electric vehicle manufacturer Rivian has made a strong showing at stations I visit in Southern California. That includes locations across Los Angeles, north Los Angeles County, and Kern County (Mojave Desert).

Los Angeles and its surrounding areas — a Mecca for electric vehicle enthusiasts — is a good litmus test for EV nameplate acceptance.

The Rivian R1T truck — a unique and appealing design when you see it up close — shows up consistently at one of the largest and most popular Electrify America charging stations in Santa Clarita, Calif. On some weeks, I visit the location up to four times. And my discussions with owners are invariably positive.

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Positive in the sense that they believe that they have bought into a company and a culture — not just a car. (Think: Apple and Tesla.)

The most recent — and most representative — conversation was at an Electrify America charging station in the town of Mojave, Calif., where two Rivian R1Ts were vying for chargers. With the exception of some minor gripes about unpolished software, the driver of one of the R1Ts waxed positively eloquent about his Rivian experience and his frequent trips to Las Vegas (and back). Suffice to say, the R1T was an integral part of his lifestyle and not just a car.

The downside

Rivian, on the other hand, is facing an existential crisis, as many EV startups do. Tesla, in the past, not excluded.

The company lost money on each car it sold in 2022. Free cash flow for 2022 was a negative $6.4 billion, according to results posted earlier this year. That’s a number that few tech companies have the dubious honor of even getting close to, as the Wall Street Journal notes.

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And 2023 is shaping up to be expensive too.

Meanwhile, the stock has collapsed from its high of close to $130 in November of 2021. And share prices continue to get hammered as competition from legacy automakers such as Ford and GM and others heats up.

On the upside, the company saw its net loss narrow in the first quarter of this year from a year ago, reporting a net loss of $1.35 billion down from the $1.59 billion in the first quarter of 2022.

And the company is trying to cut costs where it can. It canceled a partnership with Mercedes-Benz, delayed the launch of a low-cost R2 platform, and announced layoffs.

Another good sign: deliveries of the the R1T appear to be happening within two weeks in some cases, an indication of production progress. (Rivian produced 9,395 vehicles in the first quarter of this year, up from the same quarter of last year when it produced 2,553 vehicles.)

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In conclusion

I see two Rivians. The Rivian that the man on the street sees, which is generally positive. And the Rivian that Wall Street sees, which is negative — at least at the moment.

The Rivian on the street is already succeeding. If Rivian can get past its existential crisis stage, it’s set for EV success.

See Edmunds review of a Rivian in its long-term fleet.