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The stock market is really gaining momentum Rivian (NASDAQ:RIVN) From the new year. The stock has remained strong on the back of higher-than-expected losses and a disappointing outlook in its fourth-quarter earnings release, declining 52% so far in 2024.
What’s interesting is that, as Morgan Stanley analyst Adam Jonas pointed out, “just about everyone loves Rivian trucks.” But Rivian’s problem is fundamental. He is having a hard time producing vehicles for less than the selling price. “Furthermore, the broader EV market slowdown will make it difficult for the company to significantly grow its sales for at least the next year,” Jonas said.
So what does Rivian need to do to bring about a change in investor sentiment? Jonas said the company is “finally moving into the ‘crisis’ mode so often required to bring about real change in this industry. In some ways, the current situation may be beneficial, he said.
Jonas believes that EV manufacturers now need to approach the issue with a “high sense of urgency” and that to turn the situation around, EV manufacturers need to focus on the “3 Cs.”
The first is cost. Last year, Rivian reduced his COGS per unit by about $100,000, but his gross margin was still -44%. For this year, Jonas sees an additional $38,000 improvement in COGS per vehicle, and the company should approach breakeven gross margins by the fourth quarter of 2024. He needs to complete all of this in less than a year, with “relatively flat sales, significant redesign of content on both R1 and EDV, and significant improvements in purchased component and material costs.” there is.
The next area of focus is capital discipline. Rivian announces her 10% reduction in workforce, marking a move to achieve more with less. But Jonas questions the company’s decision to move forward with a $5 billion greenfield assembly plant outside Atlanta, especially when the current pace of spending leaves it with only about 18 months of cash on the balance sheet. There is. He suggested Rivian should rethink its strategy and look for other uses for its capital.
Finally, companies need to consider collaboration. Jonas expects to see more collaborative efforts among car companies to increase the efficiency of highly commoditized parts of electric vehicles, especially in light of the ongoing EV shakeout. The analyst expects Rivian to actively participate in trends that are likely to take off.
Despite the challenges, Jonas remains optimistic, rating RIVN stock an Overweight (i.e. Buy), although he lowered his price target from $24 to $14. Nevertheless, there is still a potential upside of 24% from current levels. (Click here to see Jonas’ track record)
Looking at the consensus breakdown, analysts consider RIVN stock a Moderate Buy, with 9 Buys, 9 Holds, and 2 Sells added. Given the recent decline in the stock price, there is a lot of upside potential. The average price target is $17.72, with room for a 12-month return of ~57%. (look Rivian stock price prediction)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. Content is for informational purposes only. It is very important to perform your own analysis before making any investment.
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