Rivian Automotive (RIVN -1.05%) stock opened lower Wednesday after reporting earnings Tuesday night. News that the company still plans to produce 57,000 electric trucks this year and is cutting its costs failed to alleviate investor worries about Rivian's dwindling cash balance, as well as its continued inability to earn a profit.
One analyst who's particularly pessimistic about the stock is Wells Fargo's Colin Langan. On Wednesday, Langan cut his 12-month price target on Rivian shares to just $10. Rivian stock closed not far from $10 on Wednesday. In other words, according to Langan at least, there's literally no upside to owning Rivian stock today. And there won't be for at least a year.
Is Rivian stock a sell?
What's got Langan so disappointed in Rivian? To begin with, analysts already weren't optimistic heading into the Q1 report, predicting the electric truck company would lose $1.17 per share. But Rivian managed to underperform even that estimate, reporting a $1.45-per-share loss. Sure, Rivian is cutting capital spending and taking other steps to slow its losses, but in a note on TheFly.com, Langan argued the company's "free cash flow burn rate" is still too high.
And he's right.
Q1 capital expenditure at Rivian wasn't too scary a number, only $254 million, implying about $1 billion per year. Problem is, the EV maker is losing nearly $39,000 per electric truck it produces, and its cash from operations is negative $1.3 billion. Add those numbers together, and the company's still burning about $1.5 billion a quarter, or $6 billion a year! With less than $8 billion in the bank, that means Rivian will run through the last of its cash in about 16 months -- too soon to complete development of the R2 electric SUV that it hopes will revive EV demand in 2026.
Rivian can still sell more stock to raise the cash it needs. But as its stock price falls, each new share sold brings in less cash. Even $10 a share is too much for Rivian.
