Rivian's Target Is Attractive Versus Tesla Backed By Topline Growth Prospects, Robust Demand, Analyst Says; Debt Offering Likely To Fuel Capex

Mizuho analyst Vijay Rakesh maintains Rivian Automotive Inc RIVN with a Buy and lowers the price target from $37 to $35.
RIVN announced a $1.3 billion green convertible senior note offering.
Rakesh believes the offering proceeds will likely fuel capex investments at Normal and potentially Georgia while adding ~$60 million - $69 million annual interest expense leading to an estimated ~$0.07 annual negative EPS impact.
Rivian noted F24E cash burn to improve by ~40% versus F23E, with an estimated F23E OCF at ($3.9 billion).
Rivian also sees F25E cash burn better Y/Y as it targets reaching near total capacity at Normal.
Related: Rivian Q4 Earnings Recap: EV Delivery, Production Totals, 2023 Guidance, R2 Update And More
Rivian noted its ~$2 billion/yr capex plans over the next few years. Around 55% will go towards ramping Normal capacity, ~20% for the next-gen platform (R2) tooling, >15% to go-to-market operations, and the remaining to IT, logistics, and operational investments.
RIVN noted R2 pricing in the low-$40k to ~$55k range and launching in 2026E, which would be eligible for the $7,500 tax credit and, the analyst believes, also the $10/kWh battery credit with a domestic battery supply chain ramped.
RIVN reiterated that it expects a positive gross margin in 2024E backed by higher unit volume, higher pricing and lower raw material costs, and regulatory credits starting in 2023.
Rivian's long-term targets are 20% vehicle gross margin and 25% overall gross margin.
The analyst believes Lithium Carbonate (CN) prices are trending down 34% YTD and 31% Y/Y, ~$49k/ton versus ~$6k/ton in 2020, and believes further declines are possible with vertical integration into the battery supply chain and additional supply.
The price target revision reflects macro concerns, higher interest expense, and potential share dilution. However, the price target is attractive versus Tesla Inc TSLA, backed by expected topline growth 149%/120% Y/Y and production ramp from robust demand.
Price Action: RIVN shares traded lower by 1.88% at $14.85 on the last check Thursday.
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