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February 22, 2024

Vertiv (VRT) Snaps Back, Joby (JOBY) On Watch, Rivian (RIVN) Q4 Raises Eyebrows

Vertiv (VRT) Snaps Back, Joby (JOBY) On Watch, Rivian (RIVN) Q4 Raises Eyebrows

Vertiv Holdings (VRT) is trading higher today on the back of a monster quarter from Nvidia (NVDA) and renewed bullish AI sentiment. Recall that I moved the stock to hold yesterday to let things settle down given the big move VRT made higher into earnings. Today’s rebound is a VERY good sign. And I continue to believe management struck a conservative tone yesterday to keep the bulls (and stock) in check. That said, I do feel VRT needs a little time to digest the run from 50 and think we can be a bit patient here before initiating a new position and/or adding to current ones. The story is good, just want to be tactful regarding new purchases. Reiterating hold rating. HOLD

Joby Aviation (JOBY) was a new Watch List addition yesterday and reported after the close (I wasn’t comfortable taking a swing at the stock just hours before the report). The conference call didn’t reveal much that we didn’t already know, the big focus being that the company just completed the third stage of the FAA certification process. This is a stock that’s likely to move around a lot over the coming months/years and I’m keeping it on our Watch List for now while I look for an opening we want to jump through. WATCH

Last but certainly not least for today is Rivian (RIVN), which is being taken out to the woodshed as investors increasingly question whether or not a great EV product with cool styling and great features is enough to stimulate sustainable demand and fuel enough growth to get to the point (and well past) where Rivian makes a profit on the vehicles they do sell. On the call, analysts were openly questioning management’s strategy to stick to a vertically integrated growth plan (i.e., making its own cars in Georgia) despite the big changes in the EV market since RIVN’s IPO.

Key discussion points are that management is missing its own sales and production goals (2024 guidance for 57K units versus expectations of nearly 82K), contribution margin remains negative (i.e., cars sold at a loss) and the company faces another financing round (date and terms TBD) at some point, which might not be completed on favorable terms. This, and more, is enough to add a few bears to the den, including analysts at J.P. Morgan who eviscerated the company in their most recent note.

Others, like Bank of America, continue to think Rivian is in the right place at the right time and with the right product and strategy for the EV market. There are plenty more opinions in the wide swath between these different takes.

It should be noted that Rivian did report Q4 revenue ($1.32 billion) slightly ahead of expectations and finished the quarter with over a billion more in cash than expected ($9.4 billion versus $8.3 billion). Plus, capex guidance for 2024 of $1.75 billion is much lower than consensus of $2.4 billion, so it’s not like the wheels have fallen off the R1 here. There is also the planned R2 launch in 2026, which should come at an attractive price point.

Still, at this moment any bullish talk is akin to putting lipstick on a pig. RIVN stock is mired in the mud and looks just plain awful. Hello new all-time lows.

But taking the glass-half-full approach, the pressure is on and management and the board will be discussing next steps. There is definitely something here – the product is extremely well-received by consumers. Where the stock goes next will likely depend on decisions that have yet to be fully made. That means potential opportunity, at some point. I’m inclined to sit still and give RIVN a little breathing room. Moving to hold. HOLD

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.