Rivian Automotive Inc RIVN has all the makings of a long-term winner in the EV space, but one analyst sees broader EV market weakness weighing on the company in the short term.
What Happened: Barclays analyst Dan Levy downgraded Rivian from an Overweight rating to an Equal-Weight rating and lowered the price target from $25 to $16, citing broader EV market trends.
“It appears that even great product and tech is not enough to avoid the EV winter,” Levy said in a note to clients.
Rivian continues to battle supply constraints. Volumes are largely dependent on production levels, Levy said.
Barclays previously believed the company had sufficient backlog to continue to drive volumes higher and that Rivian would eventually reach gross profit profitability by improving manufacturing operations. However, new data tells a different story.
The Irvine, California-based company offers the R1T pickup truck, the R1S SUV and EDV commercial vans. Demand weakness for the R1T and commercial vans emerged last year. Barclays expected the R1S to continue to see strong demand given the company’s strong backlog.
Levy noted that recent data points for inventory, as well as the company’s accelerated launch of a standard range version of the vehicle indicate softened demand.
“The consequences of weak demand are significant. Not only does it mean that the volume outlook is challenged, but it also presents potential pricing risk — with both points reinforcing RIVN is likely to miss its 2024 target of reaching gross margin profitability,” the Barclays analyst said.
See Also: Rivian Pauses Deliveries In Canada, Plans To Resolve Non-Compliance With OTA Update
Rivian is scheduled to report fourth-quarter financial results after the market close on Feb. 21. The EV maker is expected to report a loss of $1.32 per share and revenue of $1.263 billion, according to estimates from Benzinga Pro.
Last quarter, Rivian beat analyst estimates on the top and bottom line and raised its 2023 production guidance to 54,000, citing progress on production lines, the ramp of its in-house motor line and an improved supply chain outlook.
“We remain focused on ramping production and implementing core technologies designed to reduce cost and improve the customer offering,” the company said at the time.
Rivian continues to face an uphill climb towards profitability and the company is going to need to maintain capital as it prepares to roll out its high volume R2 platform in 2026, Levy said.
“Amid incremental profit weakness and risk of future dilutive capital raises, we move to EW (from OW), and reduce our PT to $16,” the Barclays analyst said.
RIVN Price Action: Rivian shares were down 2.11% at $16.33 at the time of publication, according to Benzinga Pro.
Photo: courtesy of Rivian.
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