Rivian Automotive was handed a price hike late Friday after shares jumped nearly 13% last week on positive sentiment around the EV startup's R2 and R3 vehicle reveal event. However, questions remain whether the company can bring its new product line to market without help amid waning EV demand. RIVN shares jumped early before falling Monday.
UBS raised its price target on Rivian stock to 9, up from its previous 8, on Friday. However, UBS maintained a sell rating on the shares. The firm noted that after the company's Thursday product launch the "narrative around Rivian has changed."
UBS added that revealing new products diverts attention from weaker demand for the older R1 vehicle line and that Rivian's decision to pause construction on its new Georgia plant extends its cash runway. However, the firm still believes Rivian needs additional capital to bring these products to market.
RIVN shares advanced more than 4% before paring those gains, falling 0.7% to 12.69 Monday during market action. Last week, Rivian stock advanced 12.6% to 12.78. Before its Thursday product launch, Jefferies Group initiated coverage of Rivian stock with a buy rating and 16 price target.
Rivian Launches R2
The EV startup unveiled the R2 — its smaller, cheaper, next-generation vehicle and platform — on Thursday which is priced at an estimated starting price of $45,000. Rivian expects the vehicle will also qualify for the $7,500 Inflation Reduction Act (IRA) tax credit.
The vehicle had been planned to be produced at Rivian's new factory in Georgia. However, the company announced Thursday it is pausing construction of its $5 billion factory and is opening a R2 production line at its Illinois plant. Production of the R2 platform is expected to begin in 2026 with deliveries beginning in the first half of 2026.
Rivian also announced the R3, a more compact crossover style vehicle that uses the R2 platform, and a high-performance R3X offering. The company did not announce pricing or delivery estimates Thursday for the R3 or R3X. Rivian did say the R3 will be at a lower price point than the R2 and that deliveries for the R3X will begin after the R2.
In less than 24 hours after the launch, Rivian said it received more than 68,000 reservations for the R2.
Analyst Adam Jonas Weighs In On Rivian Stock
Morgan Stanley analyst Adam Jonas on Friday kept a RIVN price target of 14 and an overweight rating on the shares. Jonas wrote that the R3 reveal "stole the show" Thursday. However, the analyst also voiced caution.
"While Rivian excited the market with the unveil of its next 3 years of new product pipeline, investors may also want to contemplate the potential risks of showing too much," Jonas said.
The analyst added that potentially just as important as the new products was the decision to pause its Georgia plant plans, which should save around $2.25 billion in capital spending. However, Jonas also wrote that he does not believe Rivian can bring its new products to the market by itself.
"We believe the company may require significantly greater capital resources to commercialize the R2 and R3 model plan with confidence," he wrote.
Jonas said his "key question" is whether Rivian should "seek out a new strategic 'sponsor' before launching the 'heavy lift' phase of development or do they continue to 'go-it-alone' and potentially look for partners later phase."
It is Jonas' view that Rivian may "benefit" from a partnership to bring the R2 and R3 to market at scale.
Rivian Stock Falls On Q4 Earnings And Funding Worries
RIVN shares have remained near record lows after diving more than 25% on Feb. 22 following its fourth-quarter earnings and revenue report. The company at that time also announced layoffs and plans to keep production in 2024 flat compared to 2023.
Rivian reported on Feb. 21 a loss of $1.36 per share in Q4 with sales doubling to $1.31 billion. Wall Street expected a loss of $1.35 and revenue totaling $1.28 billion. Looking to 2024, Rivian said it expects production of 57,000 vehicles, flat with 2023. The EV startup also predicts consumer and commercial vehicle deliveries to grow by low single-digits in 2024.
The carmaker forecast that vehicle deliveries in Q1 2024 will be about 10%-15% lower than in Q4 2023 and that it is laying off 10% of its salaried workers.
Tesla Chief Executive Elon Musk posted on X, formerly Twitter, late on Feb. 21 that based on Rivian's quarterly cash on hand, the company could go bankrupt in around six quarters.
Chief Financial Officer Claire McDonough told investors on the Q4 earnings call that Rivian remains "confident that our cash, cash equivalents and short-term investments can fund our operations through 2025."
"We aim to maintain a strong balance sheet position by continuing to drive cost efficiencies and improve our vehicle unit economics, while opportunistically evaluating a variety of capital markets available to Rivian ranging across the capital structure," McDonough said.
Rivian stock ranks ninth in IBD's Automakers industry group. RIVN has a 26 Composite Rating out of 99. Additionally, the stock has a 10 Relative Strength Rating and its EPS Rating is 41 out of 99.
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