Rivian's Path To Profitability Gets Longer As Regulatory Changes Squeeze Margins

Core Viewpoint - Rivian Automotive's shares declined following mixed second-quarter results and a downbeat outlook, leading to price target cuts from analysts [1][3][8] Financial Performance - Second-quarter revenue was reported at $1.303 billion, a 5.1% year-over-year increase, slightly exceeding the consensus estimate of $1.29 billion [1] - The adjusted loss was 97 cents per share, wider than the expected 76 cents per share loss, indicating ongoing profitability challenges [2] - Adjusted EBITDA loss was $667 million, significantly worse than the anticipated loss of $492.7 million, attributed to increased investments in the R2 product line and service infrastructure [5][11] Revenue Breakdown - Software and services revenue rose to $376 million from $318 million in the prior quarter, with approximately $182 million from a joint venture with Volkswagen [4] - Regulatory credit revenue was only $3 million, far below the forecast of $107 million, due to legislative changes affecting demand for EPA and CAFE credits [9] Profitability Metrics - Adjusted gross margin fell sharply to 4.9%, down from 26.5% in the previous quarter, primarily due to lower production volumes and fixed cost impacts of approximately $137 million [4] - Core automotive gross margin excluding credits dropped to -36%, compared to an estimated -11%, resulting in a combined gross profit loss of $335 million [10] Guidance and Outlook - Rivian reaffirmed its full-year delivery guidance of 40,000 to 46,000 vehicles but downgraded its profitability outlook, now expecting gross profit to be roughly breakeven, down from a prior forecast of $300 million [5][6] - Adjusted EBITDA guidance was revised to a range of negative $2.25 billion to $2.0 billion, below the consensus estimate of negative $1.88 billion [6][12] Analyst Ratings and Reactions - Wedbush analyst maintained an Outperform rating but lowered the price forecast from $18 to $16, citing regulatory uncertainty and macro headwinds as challenges [3][7] - JP Morgan analyst reaffirmed an Underweight rating and cut the price forecast from $10 to $9, reflecting a more pessimistic view following the wider-than-expected EBITDA loss [8][12] Cash Position - The company maintains sufficient liquidity with $7.5 billion in cash and expected inflows from Volkswagen and DOE loans [13]