The Way to Profit Off of Rivian’s Disappointing Financials

Shah Gilani|March 14, 2022

Rivian Automotive Inc. (RIVN), an electric truck manufacturer, reported quarterly results on Friday that disappointed investors. The stock dropped more than 7.33% in early-Friday trading.

For the quarter, the company reported revenue of $54 million which was considerably lower than the estimates of $64 million.

On the bottom line, adjusted earnings were a $2.43 loss per share, also lower than estimates of a $2.05 loss per share.

Beyond the financials, what really impacted the stock was Rivian’s new production forecast. The company once claimed it could produce 50,000 vehicles per year. Now, due to persistent supply chain issues, its capacity has been cut to 25,000. Rivian just can’t get key components it needs to finish building its vehicles.

Even with the pandemic easing and the global supply chain crunch slowly mending, I think it’s going to be quite some time before RIVN is at full production capacity.

In the meantime, the company is burning through cash, has large operating losses, and rising interest rates will hurt the stock’s forward valuation.

I wouldn’t be surprised if we don’t see a short-term rally as bargain hunters move in to catch a bounce, but longer term, I think shares are heading lower, at least until they have a plan for sustainable production increases.

If shares of RIVN trade up to $39.75 by March 18, let’s buy the RIVN May 20, 2022 $35/$30 Put Spread for $2.25 or less. Plan on exiting the RIVN May 20, 2022 $35/$30 Put Spread for a 100% profit or if shares of RIVN close above $49.50.

But that’s not all I’m watching this week.

I’m also watching DocuSign Inc. (DOCU).

This e-signature solutions provider reported revenue of $580.8 million, which was ahead of estimates of $561.6 million. Additionally, adjusted earnings came in a $0.48, which was in line with expectations.

That’s not so bad, but shares sank more than 20% in early-Friday trading.

At issue was slowing growth now that COVID-19 lockdowns are, seemingly, behind us.

I agree that slowing growth is a problem, but the company is the preferred e-signature solution for real estate transactions as well as many other applications.

I’m not going to make any assessment of the company’s future earnings potential, but I do think we have a chance to make a quick upside profit if bargain-hunters establish positions.

If shares of DOCU trade down to $72.50 by March 18, 2022, I like buying the DOCU April 14, 2022 $75/$80 Call Spread for $2.25 or less. Plan on exiting the DOCU April 14, 2022 $75/$80 Call Spread for a 100% profit or if shares of DOCU close below $69.50.

That’s it for Monday, but don’t forget about your own watchlists. If you’ve got your eye on a few stocks and want a second opinion, email my staff at shah@totalwealthresearch.com or drop a comment below. I may feature them in this Friday’s BS.H – Buy, Sell, or Hold.

Cheers,

Shah