Analyst sets Rivian stock price target as rival Tesla…

Analyst sets Rivian stock price target as rival Tesla struggles

Rivian Automotive shares nudged higher Tuesday after a Wall Street analyst kickstarted coverage of the electric-pickup truck maker with a bullish outlook tied to its new vehicle lineup.

Rivian (RIVN) , which earlier this year was forced to shut down its main production lines amid a slump in EV demand, nonetheless stuck to its full-year forecasts last month as it looked to new lines and efficiencies to offset consumer concerns about higher vehicle prices.

"These changes are expected to improve cycle time, utilization and cost," CEO RJ Scaringe told investors on a conference call in early May.

"The opportunity ahead is significant. We hold the deep conviction that the entire automotive industry will electrify over the long-term and we continue to take the necessary steps to best position Rivian as a leader in this transition," he added.

The Rivian R2 SUV, originally slated for production in Georgia, will instead be made at the group's main facility in Normal, Ill.
Rivian

A new production platform, unveiled in March, will support Rivian's new midsized SUV, the R2, as well as its similarly sized R3 crossover.

Rivian's R2 model and the new 'Normal'

The R2, originally slated to be made at an expanded plant in Georgia, will instead be produced at the group's main facility in Normal, Ill., a move it says will ultimately save around $2 billion.

Guggenheim analyst Ronald Jewsikow, who started coverage of Rivian with a buy rating and $18 price target, sees the new platforms driving wider profit margins.

"Rivian's scalable and vertically integrated architecture, along with its R2 and R3 models, are expected to achieve a high-teens gross margin," Jewsikow said in a note published Tuesday.

He also argues that Rivian is "uniquely positioned to demonstrate to a growing share of younger, digitally oriented consumers" that the truckmaker's products are both environmentally friendly and superior in design and performance to their combustion-engine rivals.

"Our detailed analysis of Rivian's break-even glide path and R2/R3 economic potential leads us to the conclusion that Rivian will emerge from EV winter as a market leader," Jewsikow and his team wrote. They "advise clients to buy Rivian ahead of anticipated positive second-half inflection in result."

Amazon-backed (AMZN) Rivian told investors in May that it expected to make around 57,000 vehicles this year, a tally that essentially matched its prior forecasts. But the company trimmed its 2024 capital spending plans by around $550 million, to $1.2 billion.

Rivian: 'Clear path to 25% gross-margin target'

"Over the long term we continue to see a clear path to our approximately 25% gross margin target, high-teens adjusted Ebitda-margin target and approximately 10% free-cash-flow margin target," finance chief Claire McDonough told investors in early May.

Jewsikow at Guggenheim says the group isn't too far off.

"We see a credible path to break-even gross margin in fourth-quarter 2024, informed by a detailed margin build and encouraging updates surrounding the 2025 model year R1 lineup," he said.

Rivian could also benefit from a series of false starts by its larger rival, Tesla (TSLA) , in launching its signature Cybertruck.

The long-delayed project, which has been the target of a host of design challenges and recall efforts by the National Highway Traffic Safety Administration, carries a starting price of $60,990.

Rivian's R2, meanwhile, is slated for full commercial sales in 2026 with a price of $45,000. The model also will qualify for the federal government's $7,500 EV tax credit, a distinction that the Cybertruck lost at the start of this year.

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Rivian shares were marked 1.9% higher in early Tuesday trading to change hands at $11.22 each, a move that would still leave the stock down more than 45% for the year.

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