Shares of Rivian Automotive (RIVN 6.10%), the company that aims to become the Tesla of electric trucks, were trading 7.7% higher as of 12:15 p.m. ET Monday, responding both to positive news from a peer EV company, and (sort of) positive news from Wall Street.
On Monday morning, China's Li Auto (LI 6.69%) released a powerful Q4 earnings report that featured better-than-expected deliveries, sales, earnings, and free cash flow, as it nearly tripled its output of electric cars in China. Rivian and other EV stocks are all responding to the news. Rivian also benefited from receiving a couple of somewhat optimistic price target adjustments from a pair of Wall Street analysts.
What Wall Street is saying about Rivian
Rivian delivered its own fourth-quarter report last week, and in twin announcements Monday morning, investment banks Barclays and Stifel both responded by cutting their price targets on the stock. The EV maker, if you recall, reported better-than-expected sales for the quarter, but worse-than-expected losses. What really upset investors, though, was Rivian's announcement that it delivered just over 57,000 vehicles in 2023 ... and its forecast that it expects to deliver 57,000 vehicles in 2024 as well.
That's zero growth -- which is kind of slow for a supposed growth stock.
Both bankers chided Rivian for its forecast, with Stifel calling the guidance "disappointing," and Barclays commenting that the lack of growth indicates that Rivian is suffering from weak demand among truck buyers, as explained in a note referenced in an article on TheFly.com Monday morning. The British bank also took issue with Rivian's promise to break even on gross profit margins by the end of this year, warning that pricing pressures could make this difficult.
And yet, neither of these banks went so far as to advise investors to sell Rivian stock.
Is Rivian stock a buy?
Barclays -- the less optimistic of the two -- rates Rivian stock equal weight (i.e., hold), and believes the shares could reach $12 in the next 12 months -- a respectable 11% gain from current prices. Stifel actually sees Rivian surging back to $18 a share -- a 67% gain! -- and is still telling investors to buy based on the premise that Rivian will benefit from "several developing trends in 2024-26."
But here's the thing: Rivian may run out of cash before it can fully take advantage of those trends. Its cash levels have already sunk to just $9.4 billion (against $5.1 billion in debt). And Rivian burned through $5.9 billion in 2023. If its predicted flat production levels in 2024 mean that cash burn will be similarly static, Rivian's cash reserves could fall to as low as $3.5 billion before 2024 is over, leaving it with more debt than cash on its balance sheet. That could force the company to take on even more debt or issue more shares at unattractive prices in order to raise the cash it needs to survive long enough to profit from future positive trends in EV adoption.
Call me crazy, but that doesn't sound like much of a "buy" argument to me.
