Analysts unveil Rivian stock price targets ahead of earnings

Is this what they mean by “growing pains”?

It wasn’t that long ago that electric vehicles seemed destined to rule the automotive market. 

With Tesla leading the charge, so to speak, legacy auto companies were announcing their plans to go all-electric, while EV startups such as Fisker, Rivian, and Lucid looked to get their piece of the market.

But then sales slowed, and automakers began slashing prices on their electric offerings and either cutting back or completely scrubbing their EV expansion plans.

“It’s true, the pace of EV growth has slowed, which has created some uncertainty,” Mary Barra, General Motors  (GM)  chairman and CEO, told analysts during the company’s fourth-quarter-earnings call on Jan. 30. 

Barra said that while “GM remains committed to eliminating tailpipe emissions from its light-duty vehicles by 2035,” the automaker will deploy plug-in technology in strategic segments in the interim. 

The implications for the industry, including Rivian, haven’t gone unnoticed.

Rivian is a key startup in the EV sector.

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EV momentum ‘not going away’: Cox Automotive

Ford said that for 2024, it expects losses for its EV division, “Model e,” to widen to $5 billion to $5.5 billion because of pricing pressure and investments in next-generation vehicles.

Let’s look at the numbers.

Last year, a record 1.2 million U.S. vehicle buyers chose to go electric, according to estimates from Kelley Blue Book, “as the slow shift to an electrified future continued unabated.”

In 2023, the EV share of the total U.S. vehicle market was 7.6%, up from 5.9% in the previous year, consultants Cox Automotive said last month.

Related: Analyst revamps Ford stock-price target after earnings

“Still, in the automobile business, nothing happens quickly,” pricing and research firm Kelley Blue Book said. “EV growth will continue to slow, and in the year ahead, we may even report the first quarter-over-quarter sales decline in more than three years.”

Nevertheless, the Cox Automotive Industry Insights team said it was forecasting more growth in the EV market, noting that “the momentum is there and is not going away.”

Rivian CEO: Electric is the future of vehicles

Rivian founder and CEO RJ Scaringe has faith in the EV sector.

“There has been a lot of noise and a lot of dialogue recently around EV adoption,” he told analysts during the company’s third-quarter earnings call in November, “and I want to emphatically state just how deeply convicted we are that the entire automotive industry will be transitioning to electric over the next one to two decades.” 

“We’ve built and designed our business around this transition,” he said, according to a transcript of the call. 

Scaringe acknowledged the short-term “macroeconomic and geopolitical pressures impacting consumers and businesses, most notably the increase in interest rates.” He said, “We remain laser-focused on the factors within our control.”

Barclays Analyst on Rivian: ‘Great product, but…’

The Irvine, Calif., manufacturer of the R1T electric pickup truck and the R1S electric SUV recently introduced two new battery options that are priced lower than its previously cheapest options. 

Rivian, which went public in November 2021, is due to report fourth-quarter earnings on Feb. 21, and analysts are expecting the company to report a loss of $1.32 per share on revenue of $1.26 billion.

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A year earlier, Rivian, which has posted a narrower-than-expected loss in its past seven quarters, reported a fourth-quarter loss of $1.73 a share on $663 million in sales.

The company, which counts Amazon  (AMZN)  as one of its backers, laid off 20 people in its in-house battery team in December after cutting 6% of its workforce last February.

Rivian missed market estimates for fourth-quarter deliveries, handing over 13,972 vehicles in the last three months of 2023, 10% lower than the previous quarter and below estimates of 14,430, Reuters reported last month.

Barclays analyst Dan Levy says the company offers a great product and technology. But he warned that softer demand trends could pose a profit risk, with slower volume growth making it harder for Rivian to achieve positive profit margins and cash flow.

On Feb. 12, Levy downgraded his rating on Rivian to equal weight from overweight while slashing his price target by $9 a share to $16.

For investors, he said in a research note, Rivian’s ongoing need for capital raises is holding back share-price appreciation.

“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 (Rivian) is likely to miss its 2024 target of reaching gross margin profitability,” Levy said. 

In addition, the analyst said he saw future pressure due to the company’s capital needs, given preparation for the high volume R2 in 2026. 

He also noted a broad EV market slowdown, demand pressures, and more supply constraints.

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