Rivian Automotive Inc., UBS analysts said in a note on Friday. “Going off-road” amid weak demand for electric vehicles and a difficult strategy on profitability and cash flow.
“We were optimistic [Rivian’s] Analysts said the product and brand win in the end. They said there is now “more tepid” US demand for Rivian's EVs and vehicles, which poses a risk to Rivian's 2024 guidance and a potentially significant capital raise on the horizon.
Analysts, led by Joseph Spak, lowered their rating on Rivian stock
Raven
For sale, from purchase, a relatively rare reduction of two degrees. They also cut their price target on shares to $8, from $24, which would mean a decline of about 22% from Friday's prices and among the lowest targets recorded by FactSet.
The average price target for Rivian shares is $19.28, according to FactSet. Of the 28 analysts covering Rivian stock, 16 rate it a buy, eight rate it a hold, and the remaining four rate it a sell.
Rivian on Wednesday spooked investors by issuing weaker-than-expected guidance, saying production would be essentially flat for the year. Its quarterly loss was larger than expected and revenues were in line with estimates.
On the bright side, the electric vehicle manufacturer said it will unveil the next generation of cheaper electric vehicles in early March. The compact SUV is expected to cost around $45,000.
Tesla company
TSLA
General Motors is also competing to offer a cheaper electric car, which costs about $30,000.
GM
The company is bringing back the Chevy Bolt in the next few years, with the discontinued model priced at around $30,000.
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Rivian's current luxury electric vehicles — a pickup truck and a full-size SUV — are marketed as off-road “adventure” vehicles and start at around $70,000, capping demand against public concern about slowing EV demand.
Rivian's EVs are “pricy” and there is a risk to their volume and pricing, which Rivian could reduce to stimulate demand.
“More than that, [Rivian] “Growth depends on R2… but we don't think production will start until late 2026, so the real financial impact won't come until 2027 — a long time to wait for a product the stock is based on,” UBS analysts said.
Moreover, “the EV manufacturer's current strategy is cash-strapped,” they said. It makes sense to be vertically integrated, but it is “expensive and conflicted with the dual realities of slowing near-term EV demand and a vastly different capital market environment for EVs.”
“We wonder to what extent the administration can stick to the current strategy,” he said.
Where could UBS go wrong? There could be stronger demand for electric vehicles, Rivian could achieve cost reductions that are “significantly greater” than what the market takes into account, with less need for capital, and the company could shift from its current strategy and even look for a partner to improve its capabilities. Analysts said capital efficiency.
Rivian shares have lost 44% in the past 12 months, in contrast to gains of about 27% for the S&P 500 SPX.
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