The EV industry’s current struggles have been well-documented. Against a backdrop of waning demand and fierce competition, many of the names vying to take share of the nascent market have had to reset expectations and prior targets.
With the way things are shaping up, even the best names amongst the new crop are going to find 2024 hard going. That appears to be Barclays’ analyst Dan Levy’s take when considering the prospects of EV maker Rivian (NASDAQ:RIVN).
“We believe the company’s leading EV portfolio and path of improvement make it a structural winner,” said the analyst. “However, we believe the stock may disappoint in the near-term as we expect ’24 guidance to come in below consensus (we forecast ’24 EBITDA -$2.8bn vs. consensus -$2.4bn.) Given EV demand challenges, we believe RIVN will face difficulties in reaching its target of breakeven gross profit in 2024.”
While Levy is prepared for a lackluster guide amidst ongoing demand issues in the US, for the 4Q23 print (slated for release on February 21), he is actually ahead of consensus, calling for EBITDA of -$927 million vs. The Street’s -$1,040 million forecast.
Yet, given the “difficult demand environment” in the US for EVs, whilst appreciative of “R1 production line upgrades, architectural changes, commercial negotiations, and raw mat price softening (especially lithium)” all going toward improving gross margins, the company will still find it challenging to come good on its ambitions for ASP and volume growth in 2024.
Positively, however, it should be noted that while Levy notes of “clear indications of weakened demand for nearly all US EVs,” that has not been the case for the R1S. The Q4 earnings call could also provide some color on the release date for the R2. Given it will be central to Rivian’s tilt towards the mass market and eventually reaching “significant scale,” Levy says its launch will be an “important near-term catalyst for the stock.”
All in, Levy rates RIVN shares an Overweight (i.e., Buy) although his price target is lowered from $27 to $25. Nevertheless, there’s still upside of 63% from current levels. (To watch Levy’s track record, click here)
On Wall Street, 12 other analysts join Levy in the bull camp and with the addition of 8 Holds, the stock claims a Moderate Buy consensus rating. The $25.74 average target is higher than Levy will allow and factors in one-year gains of 68%. (See Rivian stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
