Investors in Rivian Automotive (RIVN 1.89%) had a rough week, as the electric truck stock sank slowly but surely below $10 after the company issued a disappointing "earnings" report -- a report that featured no earnings at all, but rather $1.45 per share in losses.
Despite the bad news, however, Cantor Fitzgerald analyst Andres Sheppard came out with a prediction last Wednesday: Within 12 months, Rivian stock will soar 50% to close at $15 a share.
NASDAQ: RIVN
Key Data Points
Is Rivian stock a buy?
Sheppard trimmed his price target on Rivian stock from $23 a share to $15, and called this prediction of a 50% gain "conservative." Demand for electric vehicles (EVs) is down among car buyers right now, Rivian is holding production flat against 2023 levels to match demand, instead of expanding as Sheppard hoped, and the company is still losing money on each EV it sells -- about $38,000 per unit.
Nevertheless, Sheppard maintained his overweight rating on Rivian, predicting Rivian will burn only about $4 billion in cash going forward, and that gross profit margin will turn positive in the second half of 2025. There are, however, a couple of problems with this buy thesis.
First and foremost: cash. Rivian burned through $1.5 billion in free cash flow in Q1. Annualized, that works out to a burn rate closer to $6 billion than $4 billion, and 50% worse than what Sheppard predicts. At the same time, gross profit margin is deteriorating at Rivian. Sheppard himself admits he had to revise down his predictions for gross margin both for this year, and for the first half of 2025.
While it's certainly possible margins will turn around a year from now, and that this will drive Rivian's stock price higher, unless and until investors see (1) an uptick in demand for electric cars, (2) an end to the price wars among EV manufacturers, or (3), ideally, both of these things, I see little reason to think margins will improve.
And I see little reason to think Rivian stock is going to $15 a share.
