An analyst is sizing up expectations for Rivian Automotive RIVN ahead of the company’s third quarter earnings report. The comments come after the EV maker beat revenue and earnings per share estimates for the first quarter previously.
What Happened: A climb of Rivian shares in 2023 has led to a downgrade in rating from Cantor Fitzgerald analyst Andres Sheppard.
The analyst downgraded Rivian shares from Overweight to Neutral and increased the price target from $27 to $29.
Sheppard said Rivian’s production and delivery figures reported for the second quarter were ahead of estimates.
“This was a strong quarter, both relative to our estimates and vs. consensus,” Sheppard said.
One of the key takeaways from the company’s last quarterly earnings report for the analyst was the discussion of liquidity, with $11.8 billion available.
“More importantly, management reaffirmed during its 1Q call that it believes it is sufficiently funded ‘through 2025.’”
Another key factor for the analyst was Rivian appearing to end its exclusivity with Amazon.com Inc AMZN for delivery vans. Amazon is the largest Rivian shareholder with a 17% stake according to the analyst.
“We expect the fulfillment of this agreement can generate a potential sales volume of $7.2B through 2032E.”
Rivian said its gross margins will be negative throughout 2023 with a gradual improvement that could lead to positive margins in 2024.
“This will be an important catalyst, in our opinion, although in our model, we don’t expect positive gross margins until 4Q24E.”
Sheppard is downgrading the stock due to increased valuation in shares and competition in the electric pickup truck market heating up with the Cybertruck coming from Tesla Inc TSLA and more competition from Ford Motor Company F and General Motors Company GM.
Rivian will report second quarter financial results after market close on Aug. 8.
Related Link: Rivian Drives Fashion Forward With New Apparel Line Inspired By Its EV Trucks
Electric Vehicle Sector: Along with the update on Rivian, the analyst shared his perspective on the overall electric vehicle industry and reiterated Overweight calls on both Lucid Group LCID and Polestar Automotive PSNY.
The analyst said Lucid pre-announced second-quarter figures that were below estimates for production and deliveries.
“Nonetheless, we see the announcement that the company has begun ‘material shipments’ to Saudi Arabia as positive since Saudi Arabia is the company’s biggest client and has an order for up to 100,000 vehicles over a 10-year period,” Sheppard said.
The analyst expects initial orders for Saudi Arabia to increase delivery figures by 600 units in 2023 and 1,200 units in 2024.
“It’s important to note that these shipments are not vehicles that have yet been delivered, and thus won’t translate into revenue in 2Q (but will in 3Q).”
The analyst also highlighted the recent licensing of technology by Lucid, which will be a new revenue stream and could help the company’s path to profitability.
Polestar reported deliveries that came in ahead of consensus estimates.
“Polestar’s portfolio of vehicles are currently all being manufactured in China, and are being offered to customers in >26 markets across North America, Europe, and Asia.”
Positives for the analyst ahead of Polestar’s quarterly results are the Polestar 4 having a lower price point and additional Polestar retail locations opening.
The analyst says one big catalyst for Polestar is an agreement signed with Hertz Global Holdings HTZ that will see 65,000 units delivered over the next five years.
“In our view, this commercial agreement serves to significantly de-risk the business since the company will be able to secure recurring revenues over the life of the agreement.”
Sheppard also shared commentary on the overall electric vehicle market.
“We continue to expect strong customer demand for EVs in 2H23.”
The analyst said electric vehicles have seen increased sales in 2023, which comes during a tough economic environment.
“We expect this rapid acceleration to continue.”
The analyst doesn’t cover Tesla Inc, but highlighted the company in the electric vehicle outlook, noting the company saw increased production and delivery in the most recently reported quarter.
“Although TSLA’s EV market share has continued to diminish, it still remains the market leader by a considerable margin (in terms of units sold and revenue).”
RIVN Price Action: Rivian shares trade at $26.66 versus a 52-week trading range of $11.68 to $40.86 and are up 59% year-to-date in 2023.
Read Next: What 16 Analyst Ratings Have To Say About Rivian Automotive
Photo: Rivian
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