RBC downgrades this once-hot EV maker and slashes price target by 50%

Published Wed, Apr 19 20238:45 AM EDTUpdated Wed, Apr 19 202310:11 AM EDT

It's time to step to the sidelines on Rivian Automotive , according to RBC Capital Markets. Analyst Tom Narayan downgraded Rivian to sector perform from outperform, saying the once-hot electric vehicle stock has limited catalysts in the near term. "RIVN is well positioned to capture market share as the industry shifts towards electrification, and we continue to believe its clean-sheet approach and vertical integration will allow for higher margins at scale," Narayan wrote to clients Tuesday. "R2 [vehicle] reveal and production ramp can help sentiment, but near-term we see limited catalysts to accelerate profitability and believe margins will remain constrained," he added. Additionally, the analyst halved his price target on Rivian to $14 from $28. The new price target is just slightly higher than where shares closed Tuesday, at $13.43. The stock was down 2% in Wednesday's premarket. RIVN YTD line Rivian stock movement Rivian made one of the biggest public debuts in November 2021 when its implied valuation of $86 billion pushed the electric vehicle maker past the market cap of Ford. Today, however, Rivian's market cap stands at roughly $12.4 billion. The stock is down 27% this year and tumbled 82% in 2022, as rising interest rates and surging inflation soured investors on the prospects of startups. The analyst expects that Rivian's margins are improving but said the company can do little to improve on fixed costs, citing limited access to power semiconductors this year. "Fixed cost overhead is the single largest driver for margin improvement, representing 2/3rds of the overall bridge to gross margin expansion, but this is where we believe there is limited ability to accelerate beyond current plan," Narayan wrote. "RIVN is constrained on power semiconductor availability this year and while they have taken action to help mitigate the situation (added to supplier base and cut number of modules needed in a vehicle), we believe upside to the 50k production target is limited (we model 51.9k)," the analyst added. — CNBC's Michael Bloom contributed to this report.