Why Rivian Analysts Are Largely Bullish: 'EV Maker Could Be The One That Can Challenge Tesla'

Following a high-profile initial public offering and heady gains in the first few sessions, Rivian Automotive, Inc. RIVN shares have come off the highs and yet are trading above the IPO price.

Following the expiry of IPO quiet period, analysts began initiating coverage of the shares.

The Rivian Analyst: Morgan Stanley analyst Adam Jonas initiated coverage of Rivian with an Overweight rating and $147 price target.

BofA Securities analyst John Murphy initiated coverage with a Buy rating and $170 price target.

Wedbush analyst Daniel Ives started Rivian with an Outperform rating and $130 price target.

Wells Fargo Securities analyst Jennifer Langan initiated coverage with an Equal Weight rating and $110 price target.

Rivian A 'Must-Own' In A EV Portfolio, Morgan Stanley Says: Rivian's compelling product, strong management and deterministic access to capital are underpinned by a strategic relationship with Amazon, Inc. AMZN to decarbonize the final mile, Morgan Stanley analyst Jonas said in a note.

The R1T/R1S is the most capable product in the market for $80,000, the analyst said. The EV delivery van has the potential to dominate the fast-growing final mile EV fleet, which has been largely unaddressed by the EV market until now, he added.

The analyst expects closer to 300,000 unit orders from Amazon through 2025/2026.

"Rivian is a "call option" on AMZN's desire to decarbonize its delivery/fulfillment footprint in a highly visible way," the analyst said.

Auto investors who missed Tesla, Inc. TSLA have struggled to make the case for legacy OEMs and a raft of de-SPAC EV start-ups over the last 12 months, the analyst pointed out. Rivian has all the key attributes to be "the one" that won't get away from one's EV portfolio, he added.

"We see it as 'the one' that can challenge Tesla," Jonas said in the note.

Related Link: EV Craze Alters Auto Industry Landscape: Rivian Now More Valuable Than Volkswagen, Lucid Overtakes Ford's Market Cap

Rivian's Business Strategy A Key Competitive Advantage, BofA Says: Rivian's key competitive advantage is an extremely comprehensive and well-constructed business strategy, in addition to solid/innovative technology and interesting/attractive product, BofA analyst Murphy said. This has been validated by its key anchor customer Amazon, he added.

"Although this does not mean complete avoidance of the obstacles many EV start-ups have endured from concept to commercialization, we assign much more credibility to RIVN's success in this endeavor," the analyst said in the note.

It is unlikely that the company sees material revenue inflection and EBITDA/FCF breakeven until 2025+, the analyst said.

Specifically, Rivian meets six out of the 10 criteria in BofA's Autotech entrant analysis framework, which is constructive, Murphy said. A better measurement of the company's success than near-term financials, while the company/industry is still in very early stages, will be trends on pre-orders/orders as well as progress on its production ramp, he added.

Further positive developments on both fronts, the analyst said, will be necessary for the stock to work.

Wells Fargo Sees Reasons For Investor Excitement: Rivian shares have risen 34.2% compared to S&P 500's 1.5% drop, analyst Langan said. There is much to get investors excited, she added.

The R1S and R1T are exciting and compelling products, with over 55,000 orders in a growing SUV segment, the analyst noted. The company has a comprehensive strategy to own and profit from its customer over the vehicle's life, including lucrative SaaS opportunities, she added.

The cadence of product introductions, the analyst said, is rapid, with three launches before year's end, a faster pace than EV leader Tesla.

However, the stock is pricing in about 2.2 million vehicles in 10 years, in line with global luxury leaders, Langan said.

"While this is possible, it also leaves little room for error for a company with almost no manufacturing record," the analyst said.

Rivian Price Action: Rivian shares gained 11.57% Monday, closing at $116.78. 

Related Link: 2 Reasons Why Rivian Shares Are Spiking Higher