Rivian gets a double downgrade from UBS, which says profitability will be harder to achieve

Published Fri, Feb 23 20246:42 AM ESTUpdated Fri, Feb 23 202411:37 AM EST

UBS issued a rare double downgrade on Rivian , waving the warning flag amid signs of trouble for the battered electric vehicle stock. Analyst Joseph Spak lowered his rating to sell from buy and slashed his price target to $8 from $24. Spak's price target implies shares will fall 30.1% from Thursday's close. "We had been optimistic on RIVN's product and brand ultimately winning out," he told clients in a Thursday note. "But a rapidly changing EV backdrop causes us to reassess our demand view and makes RIVN's current strategy quite onerous on the ramp to profitability and cash flow." There's now material risk to consensus expectations amid the cooled demand for battery EVs, he warned. Specifically, Spak said UBS' average annual delivery forecast for 2025 to 2027 is now about 33% below prior expectations and around 42% below the Street's consensus. Spak said there's also concern about meeting guidance for 2024 gross profit and EBITDA. After hanging hopes on a path to profitability in the past, he said the timeline to Rivian breaking even on EBITDA and free cash flow has been pushed out. Previously, Spak anticipated EBITDA hitting that point in 2027, with free cash flow following a few years down the road. Meanwhile, the analyst is forecasting a capital raise that will equate to a notable share of the company's total market cap — potentially around 30% — in 2025. Spak said strong demand for EVs could affect the stock's performance going forward. An increase in cost reductions or strategy pivot could also help quell the need for capital, he said. RIVN YTD mountain Rivian, year to date Rivian stock lost nearly 1% before the bell Friday. Shares have dived more than 51% in 2024 alone, already erasing all of 2023's gains. With the downgrade, Spak adds to a growing chorus of analysts concerned about the stock following its latest earnings report. Rivian issued a weak production outlook, while announcing it would cut 10% of its salaried staff. UBS wasn't the only firm to get more bearish on Rivian. JPMorgan lowered its rating on the stock to underweight from neutral and cut its price target to $11. "The reasons for our downgrade are multifold, including: (1) The company has fallen far short of its own targets for vehicle sales and production, let alone the seemingly much more ebullient expectations of its investors, and disappointing new guidance revealed yesterday implies essentially no growth in 2024," analyst Ryan Brinkman said in a Thursday note.