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Rivian Automotive (NASDAQ:RIVN +3.8%) trades more than 80% below its post-IPO high with the company’s earnings report on Wednesday expected to test the mettle of investors.
Morgan Stanley is bullish on Rivian (RIVN) even though it sees a cash crunch ahead. Analyst Adam Jonas and team forecast RIVN to consume nearly $900M in free cash flow this year while delivering 1,200 consumer units for a cash burn of approximately $750K per unit. The company is noted to have begun FY22 with over $18B of cash, but MS expects the company to burn over $7B in FY22 and raise an additional $3B of capital by the end of the year due to the capital-intensive nature of ramping EV production.
Jonas and team believe the strategic role of Amazon is the linchpin to the Rivian story, especially as it begins to vertically integrate into on-shore battery manufacturing and related content. The ultimate goal is noted to be architecting a secure battery/EV supply chain with greater North American content and relatively less dependency on disparate/Chinese battery supply chain.
“While we acknowledge the Rivian business plan is not yet fully funded through mid-decade, we are excited at the important role the company can play in helping to lead US on-shore battery manufacturing while serving the world’s most sophisticated logistics fleet (Amazon).”
Looking down the road, the nearly 3X upside to the price target of $85 vs. the net cash value of approximately $12 per share makes RIVN look compelling to Morgan Stanley. The $85 PT consists of $53 per share for the automotive business and $32 per share for the software services side.
Rivian Automotive (RIVN) missed revenue and EPS estimates with its first two earnings reports.