Rivian stock charges higher as Stifel says it's a 'Buy'
Stifel says EV headwinds will wane, paving the way for sales growth.
Rivian (RIVN) stock is on the move higher today with a new bull joining the herd.
Stifel initiated coverage of the electric adventure vehicle maker with a Buy rating and a $23 price target. The investment bank sees better pricing, strong demand for its vehicles, and margin expansion in the year ahead as positive catalysts.
Stifel analyst Stephen Gengaro wrote that bullish factors include the “high-quality” R1 vehicles driving brand awareness; Amazon’s prior order of 100,000 EDVs, and the opening of EDV purchase from other commercial fleets; the upcoming new R2 platform that could strongly compete with Tesla’s Model Y; and margin expansion including new technology like Rivian’s in-house Enduro motors and new battery pack, along with better pricing and supplier agreements among other factors.
That being said, Gengaro notes headwinds like the current macro environment, high rates, and cash burn. Nevertheless Gengaro and the Stifel team are bullish on EVs in general.
“Electric vehicle sales have faced stiff headwinds recently, driven by both macroeconomic factors (high interest rates, inflation, and recessionary worries) as well as EV specific headwinds including range anxiety, vehicle costs, model availability, and charging infrastructure. We believe these EV hurdles will shrink over the next few years, paving the way for sales growth,” Gengaro wrote in his note.
Stifel’s note comes on the heels of positive news in recent months from Rivian. The automaker reported third quarter results that beat expectations last month, and boosted its full-year production forecast to 54,000 from 52,000 units. Its prior forecast of 52,000 units was lifted earlier in the year from 50,000.
Rivian also narrowed its full-year adjusted EBITDA loss to $4.0 billion from $4.2 billion and revealed that its 2023 capex (capital expenditure) guidance was reduced to $1.1 billion.
This has powered the stock higher to the tune of 23% over the past month, and now Rivian's stock sits at a 2.4% gain for the year.
However, Rivian's path to profitability is by no means assured. Rivian’s valuation balances the company’s “recently strong execution against a challenging 2+ year execution plan,” Piper Sandler analyst Alexander Potter wrote in a note following earnings, adding that there is “a non-zero risk of delays and cost overruns.”
The near-term problem for Rivian is the company lost $942 million on an adjusted basis last quarter. With the company delivering around 16,300 vehicles, that means Rivian lost over $60,000 on every car sold.
With the company still forecasting positive gross profit by 2024, CEO RJ Scaringe and team still have their work set out for them.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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