Morgan Stanley analyst Adam Jonas reiterated an Overweight rating and an $85.00 per share price target on Rivian (NASDAQ:RIVN) ahead of earnings.
Rivian stock price is down over 80% since the IPO amid tighter macroeconomic conditions. For Jonas, Amazon (NASDAQ:AMZN) remains the “linchpin to the story,” as the EV maker “begins to vertically integrate into on-shore battery manufacturing and related content.”
And this is where the risk is.
“The architecting of a secure battery/EV supply chain with greater North American content and relatively less dependency on disparate/Chinese battery supply chain is the goal. This is highly capital intensive stuff that many Rivian investors may not be ready for,” Jonas notes in a note.
Along these lines, investors will search for these clues before having a more constructive view on RIVN.
1) The estimates have bottomed - we still see another leg down in company volume targets; or 2) The pace of cash consumption is controlled in such a way as to reduce the chance that the company is a forced capital raiser during a time of great market dislocation.
Net-net, Jonas reiterated that his PT offers a potential upside of almost 300%.
“While we understand the Rivian narrative is too ‘2021 growthy’ for the current market environment, we believe increased deliveries of the R1T (including in your neighborhood) and any semblance of stabilization of cash consumption/cost control can help reverse the self-fulfilling negative sentiment cycle. 1Q results and the rest-of-year outlook may not be pretty, but see the nearly 3x upside to our price target vs. the ‘net cash value’ of approximately $12/share (FY22e) compelling,” Jonas concluded.
Rivian stock price is down a further 1.7% in pre-market Wednesday.
By Senad Karaahmetovic