Major Wall Street firms including Goldman and JPMorgan initiate Rivian at neutral, citing sky-high valuation

Published Mon, Dec 6 20217:43 AM ESTUpdated Tue, Dec 7 20216:24 PM EST

A flurry of Wall Street firms initiated coverage of newly public electric-vehicle start-up Rivian before the market opened Monday, with several major firms rating the stock neutral due to its sky-high valuation. Rivian debuted in November in one of the biggest IPOs this year . The start-up has a market cap of $89 billion, valuing the company higher than legacy automakers Ford and General Motors. "Our Neutral rating balances — on the one hand — extremely compelling top-line growth prospects, surprisingly world class products for a new manufacturer, and structural industry tailwinds, with — on the other hand — equally heavy investments anticipated to fund that growth and valuation which is clearly already pricing in a lot," JPMorgan's Ryan Brinkman said in a Monday note. The firms set a $104 price target on Rivian, in line with where the stock closed Friday at $104.67. Goldman Sachs likes Rivian's products across hardware, software and services, but stopped short of rating it a buy. "Overall, we believe Rivian is well-positioned in the industry. However, the automotive industry has historically been difficult for new entrants to scale, including in EVs," Goldman Sachs' Mark Delaney said in a note Sunday. The firm initiated Rivian at a neutral rating and set a 12-month price target of $94 on the stock, implying 10% downside from the Friday close. Goldman believes Rivian has "attractive products, technology, and growth potential" but that those advantages are currently "offset by full valuation." Wells Fargo also said "there is much to get investors excited," but it initiated at an equal weight rating. Rivian's current valuation "leaves little room for error for a company with almost no manufacturing record," Wells Fargo's Colin Langan said in a note Monday. Other analysts were more bullish on Rivian, with firms such as Morgan Stanley and Piper Sandler placing the company on par with Tesla. Bank of America initiated Rivian with a buy rating and set a $170 price target on the stock, implying 62% upside. "RIVN's key competitive advantage among the universe of incumbent and start-up EV automakers is an extremely comprehensive and well-constructed business strategy," Bank of America's John Murphy said. Take a look at what analysts on the Street had to say about Rivian: Goldman Sachs — Neutral rating, $94 price target "Overall, we believe Rivian is well-positioned in the industry. However, the automotive industry has historically been difficult for new entrants to scale, including in EVs (e.g., Tesla has faced delays on product launches). Rivian is still in the early stages of its ramp, and while the company has a team with industry veterans, the supply chain environment remains challenging." JPMorgan — Neutral rating, $104 price target "Our Neutral rating balances — on the one hand — extremely compelling top-line growth prospects, surprisingly world class products for a new manufacturer, and structural industry tailwinds, with — on the other hand — equally heavy investments anticipated to fund that growth and valuation which is clearly already pricing in a lot after a recent sharp rise in the shares (at one point more than doubling since the company's recent IPO). Rivian's strong valuation increases our confidence in its ability to fund its growth ambitions." Wells Fargo — Equal weight rating, $110 price target "The company has a comprehensive strategy to own and profit from its customer over the vehicle's life, including lucrative SaaS opportunities. Moreover, the cadence of product introductions is rapid, with three launches before year-end, a faster pace than EV leader TSLA. However, the stock is pricing in ~2.2m vehicles in 10 years, in line with global luxury leaders. While this is possible, it also leaves little room for error for a company with almost no manufacturing record." Barclays — Neutral rating, $120 price target "Rivian's differentiated consumer branding centered around adventure makes it unique in the EV market and we believe provides a solid foundation for recurring revenues, while its BEV vans have the premier last-mile customer. With a culture focused on teamwork, we are confident that RIVN can grow into a major, multi-product OEM. As much of this is already priced in, we initiate at EW." Morgan Stanley — Overweight rating, $147 price target "Rivian's compelling product, strong management, and deterministic access to capital are underpinned by a strategic relationship with AMZN to decarbonize the final mile. We see it as 'the one' that can challenge Tesla." Bank of America — Buy rating, $170 price objective "In our view, RIVN's key competitive advantage among the universe of incumbent and start-up EV automakers is an extremely comprehensive and well-constructed business strategy, in addition to solid/innovative technology and interesting/attractive product, validated by a key anchor customer AMZN. Although this does not mean complete avoidance of the obstacles many EV start-ups have endured from concept to commercialization, we assign much more credibility to RIVN's success in this endeavor." Piper Sandler — Overweight rating, $148 price target "Lots of companies say they intend to replicate Tesla's success, but in our view, most of these companies will fail. This is because they rely too heavily on supply chain partners, and they lack the expertise (and the courage) to develop their own software, semiconductors, batteries, charging networks, and direct-to-consumer business models. Rivian's management team understands this, and as a result, has chosen to exploit the advantages of vertical integration." Deutsche Bank — Buy rating, $130 price target "We believe the company offers a particularly well thought-out business plan to become a large and profitable EV player, with unique characteristics in both hardware and software, and applying lessons from previous efforts by other players." Mizuho — Buy rating, $145 price target "15 years after Tesla, RIVN is redefining the EV market with its electric SUV and pickup trucks with notable off-road performance and power, as well as its electric delivery van. We believe RIVN 1) has a $9T global consumer and commercial market opportunity, 2) is targeting SUVs/light trucks, the most profitable and fastestgrowing auto segments, 3) has a first-mover advantage in Commercial EV vans, and 4) benefits from vertical integration of manufacturing, powertrain, in-house software, and battery. Longer term, we see beginnings of the next $1T EV OEM." RBC Capital Markets — Outperform rating, $165 price target "Rivian has category defining vehicles with a focus on the key truck segment that should allow for 50% revenue CAGR through end-of-decade. A clean-sheet approach and strong tech will allow RIVN to eventually use the vehicle as a platform for higher-margin software & services." — CNBC's Michael Bloom contributed reporting. Correction: This article has been updated to reflect that Rivian has a market cap of $89 billion.

Rivian signage at the Nasdaq on its initial public offering day in New York, Nov. 10, 2021.

Source: Rivian