Morningstar

Rivian: Shares Plunge on Stock Offering Despite Second-Quarter Revenue Above Consensus

We expect the share issuance price to be not too far below our fair value estimate, limiting dilution.

Sign with logo on facade of Rivian location.
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Securities in This Article
Rivian Automotive Inc Class A
(RIVN)

Key Morningstar Metrics for Rivian Automotive

  • Fair Value Estimate
    : $20.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : None
  • Morningstar Uncertainty Rating
    : Very High

Rivian Automotive RIVN announced it will issue up to 86.25 million shares. The company also announced its second-quarter revenue range, which was above the midpoint of FactSet consensus estimates. Rivian shares were down 13% at the time of writing on July 7 on the news.

Why it matters: Rivian is still an early-stage company that has not yet turned a profit or generated positive free cash flow. As a result, we are not surprised by the plan to raise equity, as we thought the company would need to raise at least $2 billion in equity over the next three to four years.

  • Issuing the equity now should result in Rivian being largely funded as it works to ramp up production of its new midsize sport utility vehicles, ramp up its joint venture with Volkswagen, and develop autonomous driving software for use in Rivian vehicles and by Uber for ride-hailing.
  • The revenue growth above consensus estimates follows the company’s strong second-quarter delivery numbers reported last week. We expect Rivian to see rising sequential revenue and improving financials as R2 production and deliveries ramp.

The bottom line: For now, we maintain our $20 per share fair value estimate for no-moat Rivian. Shares were trading around our fair value estimate before the stock issuance was announced, so we expect the share issuance price to be not too far below our fair value estimate, limiting dilution.

  • After the share issuance price is announced, we plan to update our model to include the share issuance and our updated outlook for the year following the revenue numbers.

Coming up: Rivian plans to release its second-quarter results on July 30, after the market close. We hope to hear about the company’s progress on ramping up production of the R2, as well as an update on its autonomous driving software, where the company plans to release a Level 2 product later this year.

  • We also hope to hear about the company’s plan to generate positive free cash flow. We currently forecast this will occur in 2030.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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