Analysts believe Rivian is turning around, Goldman sees 40% upside

Published Wed, Nov 8 202311:40 AM ESTUpdated Wed, Nov 8 20232:02 PM EST

Rivian Automotive may be a standout name in the slowing electric vehicle market, according to several analysts. Major firms, from Goldman Sachs to Morgan Stanley, view the EV maker as a strong play, particularly as its competitors struggle to meet their production goals amid slowing demand. Rivian reported third-quarter earnings and revenue that beat analysts' expectations Tuesday. Shares initially rose but were later down on the day. Rivian's competitors aren't doing too hot. Luxury EV developer Lucid cut its full-year production Tuesday. Shares of Lucid declined 7% Wednesday, bringing their year-to-date losses to more than 40%. Tesla, General Motors and Ford have each slowed their electric vehicle production capacity expansions, citing increased economic pressures on consumers. Ford on Oct. 26 postponed about $12 billion in EV manufacturing investment, saying many customers in North America are unwilling to pay a premium for an EV over an internal-combustion or hybrid alternative. While shares of Tesla are up 79% for the year, General Motors and Ford have declined 16.6% and 12.8%, respectively. Rivian shares, meanwhile, are up 9% this month. What analysts are saying Goldman analyst Mark Delaney raised his price target by $2 to $25, implying shares can gain 43.5% from Tuesday's close. "We believe that the quarter was a modest incremental positive with respect to longer-term volumes, and the company is executing on its cost targets," Delaney said, noting that Rivian's management believes demand remains strong with gross profit per vehicle improving quarter over quarter. Delaney maintained his neutral rating on the stock, however. The rating reflects the high degree of competition in the EV industry and the potential for it to affect Rivian's profits, especially as Rivian is still growing and has a fairly limited product set, the analyst said. "If we gain more conviction in the timing/path to profitability we could be more positive on the stock," Delaney said. Evercore ISI is more optimistic on the stock, with analyst Chris McNally maintaining his $35 price target, which implies 100.9% upside to the stock since Tuesday's close. "We believe our RIVN thesis still holds & the sell-off into the print creates an even better buying opportunity for the mid-long term outlook," McNally said, adding that he expects gross margin to break even by the end of 2024. RIVN YTD mountain Rivian stock. On the other hand, Wells Fargo analyst Colin Langan maintained his equal weight rating on Rivian, saying there's a "murky line of sight" ahead for the stock. He still raised his price target by $5 to $24, which implies shares can gain 37.8% over the next 12 months. "The company has a low margin for error in all aspects of its business. … Rivian must prove it can acquire the customer base, while maintaining low advertising costs," Langan said. "With scale tailwinds moderating, we expect breakeven in 2024 to be tough given the large needed cost savings." The next year remains critical for Rivian, Langan said, pointing out that rising capex in 2024 is a risk after Rivian lowered its capex guide from $1.7 billion to roughly $1.1 billion. Piper Sandler is similarly cautious on Rivian's capital expenditures and cash flow, particularly during the next four to eight quarters, as Rivian continues to build its $5 billion factory in Georgia. The firm still moved its 2023 estimates modestly higher after the company's earnings. "We still think the valuation properly balances Rivian's recently strong execution against a challenging 2+ year execution plan," Piper Sandler analyst Alexander Potter said in a note. "In our view, Rivian has one of the most appealing brands in the U.S. auto industry." Morgan Stanley, however, thinks Rivian has "sufficient liquidity" through late 2025 given its third-quarter burn rate. The firm maintained its $24 price target on shares.