U.S-.based electric vehicle (EV) maker Rivian Automotive (NADSAQ:RIVN) recently joined General Motors (NYSE:GM) and Ford (NYSE:F) in collaborating with Tesla (NASDAQ:TSLA) to adopt the Elon Musk-led company’s supercharger network. The news boosted investor sentiment, with Rivian shares rising 23% over the past five days. However, the stock is still down about 10% year-to-date. Wall Street is cautiously optimistic on Rivian due to macro uncertainty, intense competition, and company-specific risks.
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Rivian is Facing Multiple Headwinds
Rivian stock has declined significantly from the peak levels seen in November 2021, when it made its public debut. Execution issues, supply chain bottlenecks, competition, and macro pressures impacted the stock’s performance.
Moreover, investors are worried about the significant cash burn, as Rivian continues to invest in production ramp-up. The company’s negative free cash flow increased from $4.4 billion in 2021 to $6.4 billion in 2022. In the first quarter of 2023, Rivian’s negative free cash flow came in at $1.8 billion, up from $1.45 billion in the prior-year quarter.
Rivian currently manufactures R1T pickup trucks, R1S SUVs, and electric delivery vans (EDVs) for Amazon (NASDAQ:AMZN) under an agreement to deliver 100,000 EDVs. In the first quarter, the company produced 9,395 vehicles and delivered 7,946 units. A 596% jump in revenue to $661 million helped in lowering the adjusted loss per share to $1.25 from $1.43 in the prior-year quarter.
While Rivian reaffirmed its full-year production outlook of 50,000 vehicles, critics doubt its ability to meet its target, given the underwhelming performance last year when the company slashed its initial production guidance by half to 25,000 units.
Is Rivian a Buy, Sell, or Hold?
In a research note to investors on June 20, Mizuho analyst Vijay Rakesh said that Rivian continues to execute well with solid demand and ramping of its Normal, Illinois Facility. However, the analyst lowered his estimates for deliveries in 2024 and 2025, noting “production changeovers” due to the adoption of in-house motor Enduro and lithium iron phosphate (LFP) battery pack.
The analyst noted that Rivian remains focused on being gross margin-positive in 2024, driven by higher volumes, increased pricing, lower raw material costs, and structured contracts with suppliers. Rakesh lowered his price target for Rivian stock to $27 from $30 and reiterated a Buy rating.
Wall Street’s Moderate Buy consensus rating on Rivian is based on eight Buys, four Holds, and two Sells. The average price target of $21.93 implies nearly 32% upside.
Conclusion
Rivian is confident about producing 50,000 EV units this year. Wall Street’s average price target indicates an attractive upside to the stock. However, concerns over execution, the impact of intense rivalry in the EV space, and macro headwinds could impact investor sentiment for RIVN.
