By Akash Sriram
Shares of Rivian Automotive Inc rose 7% on Wednesday as its positive earnings stood out in a poor quarter for electric-vehicle startups, but analysts warned that stiff competition will be a hurdle in its path to profitability.
The company looked set to add nearly $800 million to its market valuation, based on premarket stock prices, after it reiterated its annual production forecast and beat quarterly revenue estimates.
The results showed how Rivian's move to raise prices last year has helped the EV maker stem cash burn at a time when peers Lucid Group Inc and Nikola Corp are struggling with ballooning losses.
Graphic: Rivian quarterly loss drops to lowest in over a year Rivian quarterly loss drops to lowest in over a year - https://www.reuters.com/graphics/RIVIAN-RESULTS/gkvlwknaapb/chart.png
"We do see the average selling price continuing to expand and grow," CEO RJ Scaringe said, adding that Rivian's expanded offerings including a larger battery called the "Max Pack" will aid demand.
Still, some analysts were skeptical about the prospects of a company that is caught in a price war started by market leader Tesla Inc and faces increasing competition from well-heeled legacy players such as Ford Motor Co.
"We continue to like the truck, but not necessarily the stock and the headlines that may be ahead," said Michael Shlisky of D.A. Davidson, who was among the 10 analysts that lowered their price target on a stock that has declined 25% this year.
Graphic: EV stocks throttled by supply chain constraints, demand woes - https://www.reuters.com/graphics/RIVIAN-STOCKS/byvrldooeve/Pasted%20image%201683711198286.png
Shlisky said Rivian has seen some success in reducing costs by switching to self-made Enduro motors and cheaper lithium iron phosphate batteries, but its efforts to renegotiate with suppliers for lower prices might not yield results as it lacks production volume.
The Amazon-backed company made 9,395 vehicles between January and March, which equates to about 2% of the 440,808 produced by Tesla in the same period.
Graphic: Rivian and Lucid account for a fraction of Tesla's sales - https://www.reuters.com/graphics/TESLA-ELECTRIC/STARTUPS/myvmowmnevr/chart.png
Nonetheless, the company is expected to benefit from a pullback in commodity prices and easing supply chain issues.
"As sagging EV commodity prices, technology improvements, and supply chain loosening positively impact operations, we see a logical path to positive gross margins next year," Canaccord Genuity analysts said.
(Reporting by Akash Sriram in Bengaluru; Editing by Saumyadeb Chakrabarty)
