By Akash Sriram
Shares of Rivian Automotive Inc rose 11% 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 about $1.4 billion to its market valuation after the EV maker reiterated its annual production forecast and beat quarterly revenue estimates.
The results showed how Rivian's move to raise prices last year has helped it stem cash burn at a time when peers Lucid Group Inc and Nikola Corp are struggling with worsening 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.
"There is an increasingly narrow window of opportunity to muscle its way off the side-lines and onto the main track but ... the path is full of great big potholes that already have seem to have impeded some of its startup peers such as Lucid," said Danni Hewson, AJ Bell's head of financial analysis.
Amazon-backed Rivian 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
D.A. Davidson analyst Michael Shlisky, who was among the 10 analysts that lowered their price target on the stock, said Rivian has seen some success in reducing costs by switching to self-made Enduro motors and cheaper lithium iron phosphate batteries.
The company is also 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.
Graphic: - EV stocks throttled by supply chain constraints, demand woes - https://www.reuters.com/graphics/RIVIAN-STOCKS/byvrldooeve/Pasted%20image%201683711198286.png
(Reporting by Akash Sriram in Bengaluru; Editing by Saumyadeb Chakrabarty)
