On Friday, Canaccord Genuity adjusted its outlook on Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ: RIVN), reducing the price target to $28 from $30 but maintaining a Buy rating on the shares. The adjustment follows the third-quarter production issues related to component supply challenges. Despite these issues, Rivian's delivery schedule remains on track, with the company expecting to deliver between 50,500 and 52,000 vehicles in 2024, exceeding Canaccord's previous estimates of 49,000 units.
The analyst from Canaccord Genuity expressed disappointment over the production hiccups, which had been hinted at by Rivian's management during investor conferences. Nonetheless, the firm remains optimistic about Rivian's product offerings, which are seen as distinctive and appealing in the market.
The analyst emphasized looking beyond the current production difficulties to the broader potential in the electric vehicle (EV) industry, particularly noting the ongoing shift away from internal combustion engine vehicles in China as an indicator of future trends in Western markets.
The report also highlighted Rivian's joint venture with Volkswagen (ETR:VOWG_p) (VW), which is expected to close within the current quarter. This partnership is considered undervalued by the analyst and is anticipated to potentially accelerate Rivian's path to EBITDA profitability. The possibility of an operational expenditure transfer to the joint venture could facilitate Rivian in achieving positive EBITDA sooner than previously planned, as suggested by Rivian's management during the last earnings call.
In other recent news, Rivian Automotive has faced a series of developments. The electric vehicle manufacturer has revised its full-year 2024 production forecast to between 47,000 and 49,000 vehicles, down from the initially projected 57,000 units. This reduction follows lower-than-expected third-quarter deliveries and production challenges due to a component shortage. Both Stifel and RBC Capital have maintained their ratings on Rivian despite these setbacks, with Stifel maintaining a Buy rating and RBC Capital retaining a Sector Perform rating.
Truist Securities also held its rating, keeping a Hold stance on Rivian shares. Analyst firms Morgan Stanley, Jefferies, and Goldman Sachs have adjusted their ratings and price targets for Rivian, with Morgan Stanley downgrading the stock from Overweight to Equalweight due to anticipated increased capital expenditures related to autonomous vehicle technology development.
Despite these challenges, Rivian has secured an investment of up to $5 billion from Volkswagen AG (OTC:VWAGY), which could bolster Rivian's cash reserves and assist the company in achieving its first gross profit by the final quarter of 2024.
InvestingPro Insights
While Canaccord Genuity maintains a Buy rating on Rivian Automotive Inc (NASDAQ: RIVN), recent InvestingPro data paints a more nuanced picture of the company's financial health. As of the last twelve months ending Q2 2023, Rivian's revenue stood at $5.01 billion, with an impressive year-over-year growth of 68.2%. However, this growth comes with significant challenges, as highlighted by several InvestingPro Tips.
One crucial InvestingPro Tip indicates that Rivian is "quickly burning through cash," which aligns with the company's current focus on scaling production despite operational hurdles. This cash burn is reflected in the negative gross profit of $2.06 billion and an operating income margin of -117.27% for the same period. Another relevant InvestingPro Tip notes that Rivian "suffers from weak gross profit margins," further underscoring the financial pressures faced by the company as it ramps up production.
Despite these challenges, Rivian "holds more cash than debt on its balance sheet," which could provide some financial flexibility as it navigates production issues and works towards profitability. This insight is particularly relevant given the recent production setbacks mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips that could provide deeper insights into Rivian's financial outlook and market position.
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