Jefferies equity analysts initiated research coverage on Rivian (NASDAQ:RIVN) with a Buy rating and a price target of $16.
“In our view, Rivian has looked closest to Tesla in "spirit", with its own software stack, strong brand identity, global potential, and similar growth pains,” analysts said.
“An unmatched capital base could help correct gaps in the business model but the company is facing 2 critical if not existential tests this year,” they added.
RIVN climbed 4.6% in premarket trading Thursday.
These key challenges include achieving a significant $35-40k reduction in production costs through design, procurement, and manufacturing improvements, and proving that its upcoming R2 model can be developed more affordably than its predecessor, the R1.
Success in these areas is vital for Rivian as it seeks to secure an estimated $2.5 billion in funding required for the R2's launch. These efforts will also determine Rivian's ability to maintain its independence or if its intellectual property might hold more value to a larger entity, Jefferies analysts explained.
“Shares will likely remain volatile as the year unfolds and Rivian goes through reduced volume in Q1-2. We estimate Rivian will burn through $9bn of cash before turning FCF positive in 2027,” they wrote.