On Thursday, Wells Fargo adjusted its outlook on Ree Automotive Holding Inc. (NASDAQ:REE), reducing the price target to $4.00 from the previous $4.50, while continuing to hold an Underweight rating on the stock. The revision follows the company's fourth-quarter earnings shortfall, with Ree Automotive's adjusted net income reporting a loss of $32.2 million, which did not meet the consensus estimate of a $23.3 million loss by Visible Alpha.
The company's stock price has declined following the announcement of the fourth-quarter results. Analysts at Wells Fargo have estimated the order book of Ree Automotive to include only 300-350 vehicles. Additionally, there is a concern that the company will need to secure approximately $70 million in extra funding, which is about equivalent to its market capitalization, to achieve its production targets for the years 2024-25.
The discrepancy between the actual results and the Visible Alpha consensus was mainly due to higher-than-expected research and development costs, which amounted to a $14.1 million expense. This was partially counterbalanced by savings in selling, general and administrative expenses ($2.5 million), tax benefits ($2.3 million), and interest ($0.3 million). The fourth quarter saw Ree Automotive's free cash burn at $23.5 million, a slight deterioration from $20.3 million in the third quarter.
At the end of the fourth quarter, Ree Automotive had $86 million in cash reserves. Following the close of the year, the company succeeded in raising an additional $15 million.
Despite these funds, the need for substantial additional financing remains a concern for the company's ability to meet its projected production milestones in the upcoming years.
InvestingPro Insights
Ree Automotive's financial health and market performance have been areas of focus following their recent earnings report. InvestingPro data reveals a market capitalization of $63.12 million, indicating a relatively small player in the automotive industry. The company's price-to-earnings (P/E) ratio stands at a negative -0.55 as of the last twelve months ending in Q4 2023, reflecting investor skepticism about future profitability. Additionally, the price-to-book (P/B) ratio of 0.81 suggests that the stock may be undervalued relative to the company's asset value.
InvestingPro Tips highlight the importance of considering both the company's short-term and long-term performance metrics. With a year-to-date price total return of 13.62%, there's a sign of recent positive momentum in the stock price, despite the one-year price total return sitting at -33.26%. This volatility underscores the potential risks and opportunities for investors. For those looking to delve deeper into Ree Automotive's prospects, InvestingPro offers additional insights and tips—there are 15 more available tips to help guide investment decisions. Interested readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing a more comprehensive understanding of the company's trajectory.
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