Electric vehicle (EV) maker Rivian Automotive, Inc. (RIVN) is trading 82.1% below its 52-week high of $179.47, which it hit on November 16, 2021. The company operates as a designer, developer, and manufacturer of electric vehicles and accessories.

RIVN has faced several headwinds, such as raw material inflation, supply chain challenges, and increased freight costs. The company revised its adjusted EBITDA loss and capital expenditure guidance for fiscal 2022.

RIVN expects its adjusted EBITDA loss for fiscal 2022 to come in at $5.45 billion, compared to the $4.75 billion expected before. The company expects its capital expenditure to decline from the previously expected $2.6 billion to $2 billion in the current year to preserve cash.

The stock has declined 71% in price over the past nine months and 69% over the past year to close the last trading session at $32.07.

Here’s what could influence RIVN’s performance in the upcoming months:

Disappointing Financials

RIVN’s total operating expenses increased 73.1% year-over-year to $1 billion for the second quarter ended June 30, 2022. The company’s loss from operations widened 194.5% year-over-year to $1.71 billion.

Its adjusted net loss widened 153.1% year-over-year to $1.47 billion. Also, its adjusted EBITDA loss widened 133.4% year-over-year to $1.30 billion. In addition, its adjusted loss per share came in at $1.62, compared to $5.75 in the year-ago period.

Mixed Analyst Estimates

RIVN’s EPS for fiscal 2022 and 2023 is expected to be negative. Its revenue for fiscal 2022 and 2023 is expected to increase 3,225.8% and 244% year-over-year to $1.83 billion and $6.29 billion.

Stretched Valuation

In terms of forward EV/Sales, RIVN’s 8.81x is 707.3% higher than the 1.09x industry average. Likewise, its 16.06x forward P/S is significantly higher than the 0.86x industry average.

Lower-than-industry Profitability

RIVN’s trailing-12-month ROCE is negative compared to the 15.38% industry average. Likewise, its trailing-12-month ROA is negative compared to the 5.19% industry average. Furthermore, the stock’s 0.04% trailing-12-month asset turnover ratio is 96.3% lower than the industry average of 1.03%.

POWR Ratings Reflect Bleak Prospects

RIVN has an overall F rating, equating to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. RIVN has an F grade for Value, in sync with its stretched valuation.

It has an F grade for Quality, consistent with its lower-than-industry profitability.

RIVN is ranked #61 out of 65 stocks in the D-rated Auto & Vehicle Manufacturers industry. Click here to access RIVN’s ratings for Growth, Momentum, Stability, and Sentiment.

Bottom Line

It might take RIVN quite some time to report a profit as raw material inflation and supply chain issues are expected to keep hampering its production. The stock is trading below its 50-day and 200-day moving averages of $32.75 and $53.41, indicating a downtrend.

Given its weak financials, stretched valuation, and lower-than-industry profitability, it could be wise to avoid the stock now.

How Does Rivian Automotive, Inc. (RIVN) Stack Up Against Its Peers?

RIVN has an overall POWR Rating of F, equating to a Strong Sell rating. Therefore, one might want to consider investing in other Auto & Vehicle Manufacturers stocks with an A (Strong Buy) or B (Buy) rating, such as Stellantis N.V. (STLA), Volkswagen AG (VWAGY), and Bayerische Motoren Werke Aktiengesellschaft (BMWYY).

RIVN shares rose $0.11 (+0.34%) in premarket trading Tuesday. Year-to-date, RIVN has declined -68.96%, versus a -16.28% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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