Rivian Automotive (RIVN 6.10%) failed to impress investors hoping to hear about a surge in production and sales for the EV maker in 2024. In fact, Rivian told investors in its recent fourth-quarter and full-year report that it doesn't expect any growth at all in 2024.
That led UBS analyst Joseph Spak to double downgrade the stock from buy to sell last Friday. Spak also slashed his firm's price target from $24 to a Wall Street-low $8 per share. That would represent a 66% drop in the target price and a more than 20% decline from Friday's closing price. And that's after the stock already tanked on the news.
A bumpier road to profitability
Rivian says it expects 2024 production to stall at the 2023 level. That had investors selling the stock in droves.
The fear of waning demand for its high-priced electric trucks seemed to be underpinned by the company itself. In the conference call for investors, Rivian CEO R.J. Scaringe said, "Our key focus is on increasing demand to achieve our 2024 delivery targets."
Rivian certainly has a tougher path to profitability in a weaker-demand environment.
Great buy or value trap?
The UBS analysts remain positive on Rivian's product and brand. But with no growth in 2024 and continued cash burn, it now seems likely that Rivian will need to raise fresh capital at some point.
Rivian's next-generation R2 platform is expected to bring a lower-priced vehicle into its lineup. But the R2 won't be available until 2026, and Rivian will need plenty of cash both to build a new plant and continue selling vehicles at a loss. Rivian ended 2023 with a little more than $9.3 billion in cash and equivalents. But that isn't likely to get it to the launch of its R2 platform.
A fresh capital raise likely would push the stock even lower. That makes UBS' target a reasonable outcome unless something unexpected like partnering with another automaker occurs. Rivian could still be a winning stock, but the stock could well keep falling from here first.
