On Friday, Truist Securities maintained its Hold rating and a price target of $16.00 on shares of Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ:RIVN), following the electric vehicle manufacturer's announcement of lower-than-expected production and delivery numbers for the third quarter. Rivian cited a component shortage affecting both the R1 and RCV platforms as the reason for the shortfall, which also led to a reduction in the company's full-year 2024 production guidance by roughly 16% or about 9,000 units at the midpoint.
Rivian's production and deliveries fell 10% and 15% below Wall Street estimates, respectively. The company had previously discussed supplier issues related to a third-party component in its in-house Enduro motors, but the extent of the impact was anticipated to take investors by surprise. Despite the production challenges, Rivian reiterated its delivery guidance for the year, offering some reassurance about customer demand.
However, the lack of detailed information regarding the nature, magnitude, and expected resolution timeline of the component shortage is expected to negatively affect investor sentiment toward Rivian's stock. The company did not comment on its target for achieving positive gross margins by year-end, and Truist now considers it unlikely that Rivian will meet this goal unless the component shortage is resolved promptly.
The analyst also pointed out the potential for further negative impact on Rivian's shares due to the unresolved deal and associated equity investment with Volkswagen (ETR:VOWG_p), which has not yet closed. The current production issues and their implications on gross margin targets could exacerbate the negative effects on Rivian's stock performance.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Rivian's financial situation and market performance. Despite the production challenges highlighted in the article, Rivian's revenue growth remains strong, with a 68.2% increase in the last twelve months as of Q2 2024. However, this growth comes at a cost, as evidenced by the company's negative gross profit margin of -41.1% over the same period.
InvestingPro Tips reveal that Rivian is "quickly burning through cash" and "suffers from weak gross profit margins," which aligns with the concerns raised in the article about the company's ability to achieve positive gross margins by year-end. Additionally, the tip indicating that "8 analysts have revised their earnings downwards for the upcoming period" suggests that the market is adjusting its expectations in light of the recent production issues.
The stock's performance has been volatile, with a significant year-to-date price total return of -54.05% as of the latest data. This decline reflects the market's reaction to the production challenges and uncertainty surrounding Rivian's near-term prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on Rivian, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.