D.A. Davidson Senior Equity Research Analyst Michael Shlisky joins Yahoo Finance Live to discuss Rivian's earnings report.
Video Transcript
- All right. An earnings alert. Let's check out shares of EV maker Rivian, down 7 and 1/2% after hours as investors digest the latest quarterly earnings report. Not too thrilled with them. What about Michael Shlisky, DA Davidson managing director and senior equity research analyst? Good to see you, sir. What is your reaction to the numbers from Rivian just released?
MICHAEL SHLISKY: Yes. Hi. Thanks for having me. I mean, in general, it seems like almost every number is a bit light across the board as far as the outlook for 2023. Something that's actually a positive. So, certainly, the production outlook, the EBITDA outlook were a little bit light. The CapEx outlook also a little bit light. That means that they'll also be spending a little bit less money than people may have thought of. So that might be a positive. But in general, most of these numbers do seem a bit light versus what everyone was probably thinking.
- Michael, in terms of the biggest challenges ahead for the company, certainly higher costs one of them there. And in terms of how the management team navigates this potentially turns that around, what do you think the timeline realistically looks like on this?
MICHAEL SHLISKY: I'm not so sure they need to turn things around. They kind of need to speed things up. They had mentioned in their release that they're working with suppliers not just on getting more and more parts or components, but also trying to get better pricing. So those kind of things, they're saying, look, our company is now making 30,000 units this year, not the 25,000 or 24,000 from the prior year. We should get better pricing here. And so certainly when they make those kind of asks, there's going to be some pushback. They'll hopefully get them to get some contracts with a bit better pricing here.
- All right. So 50,000 is their goal for production in 2023. They say it's up 36% in Q4. You see a price target of $23. That's down from $27. Why are you cutting their price target? And why the underperform?
MICHAEL SHLISKY: Yeah. The underperform is really based upon the fact that, look, every EV company that I've covered has just faced a multitude of bad news throughout the first few quarters of production. No change here. This is exactly like everyone else has been experiencing. And it has been, like everybody else, tough for their stock price. And that's happening here. In this case, they're putting out a production number that is probably not enough of a growth rate in 2023 compared to the ending growth rate of 2022.
They were already at 10,000 units in 2022. To go from 10,000 to 12,500 a quarter isn't a big leap. And so it sounds like that might be a bit of a piece of bad news, the kind of bad news that I think is going to make the stock go down. It's really as simple as the news flow has been skewing negative. And for now, I think it's going to probably stay that way.
- Yeah. They boast of 10 million packages delivered in terms of that partnership with Amazon. When will the investor story start to include that Amazon partnership? And what's the cash situation there at Rivian?
MICHAEL SHLISKY: Yeah. I do think that part of the [INAUDIBLE] already has Amazon included in there. Certainly, there is probably a bit more to go. I think they've got to get more Amazon vehicles out on the roads. Right now, Amazon is very short on vehicles. So I cover companies that also sell to Amazon. Amazon just has not made enough vehicles for any of their brands, whether it's Rivian or anybody else. So they have to get people to take those vehicles and then to actually employ them. That's been a big challenge. But once that happens, that will make it a bigger part of Rivian's story.
As far as cash goes-- I'm looking at some of the numbers here-- the cash came in at about $1 billion better than our estimate. So they had more cash to end the year than we were expecting. That's certainly a positive. EBITDA for 2023, that was roughly just a little under a half billion worse than we were expecting. But the cash situation does not seem as dire as perhaps maybe some people have thought. So that's a slightly positive silver lining to I think what's in this report today.
- Just a bit of good news in an otherwise downbeat report for EV maker Rivian. Michael, appreciate you being with us, sir. Thank you.
