On Wednesday, Wells Fargo adjusted its outlook on Rivian (NASDAQ:RIVN) Automotive Inc shares (NASDAQ:RIVN), reducing the price target to $10 from the previous $14 while retaining an Equal Weight rating on the stock.
The revision follows Rivian's first-quarter earnings, which, despite beating consensus estimates on EBITDA, presented a miss when excluding special charges. Rivian has maintained its full-year adjusted EBITDA guidance, now inclusive of these special items.
The analysis by Wells Fargo highlighted that Rivian's adjusted gross margin per unit for the quarter was approximately $44.1K, which is down by about $3K quarter over quarter. This figure was notably affected by one-time costs amounting to $9K.
Management's commitment to free cash flow (FCF) was evident as they announced a reduction in capital expenditure guidance by $550M and set a target of only $1.5B in 2025.
Despite these measures, concerns about Rivian's cash burn persist, and the company's target of reaching gross margin breakeven by the fourth quarter of 2024 is seen as a challenging goal. The financial institution's stance remains at Equal Weight due to these factors, and the price target has been adjusted to reflect the current assessment of Rivian's financial outlook and operational challenges.
The automotive company's financial performance and targets are closely monitored by investors as they navigate the competitive electric vehicle market. Rivian's efforts to manage expenditures and achieve profitability are central to its strategy in the coming years.
InvestingPro Insights
With Rivian Automotive Inc (NASDAQ:RIVN) navigating a critical period in its journey towards profitability, real-time metrics and insights provide a more nuanced understanding of the company's financial health. According to InvestingPro data, Rivian's market capitalization stands at $10.2 billion, reflecting the market's current valuation of the company.
Despite a substantial revenue growth of 167.43% over the last twelve months as of Q1 2023, the company's gross profit margin was negative at -45.78%, indicating the costs Rivian is incurring relative to its sales.
InvestingPro Tips reveal that Rivian holds more cash than debt on its balance sheet, which can be a cushion against financial headwinds. Still, the company is quickly burning through its cash reserves, a point of concern for investors.
Analysts have also revised their earnings downwards for the upcoming period, suggesting that the market is adjusting expectations in light of recent developments. For those looking to delve deeper into Rivian's financials, there are 6 additional InvestingPro Tips available, offering further insights into the company's performance and outlook.
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