RBC cuts Rivian stock price target to $10 from $12

On Friday, RBC Capital Markets adjusted its outlook on Rivian Automotive Inc (NASDAQ:RIVN), reducing the price target on the electric vehicle maker's shares to $10 from the previous $12, while maintaining a Sector Perform rating. The revision follows a detailed financial analysis by the firm, highlighting Rivian's projected free cash flow (FCF) losses and liquidity status. InvestingPro data reveals the company's current market capitalization of $12.96 billion, with analysis showing the stock is trading near its Fair Value. Two key InvestingPro Tips highlight that Rivian is quickly burning through cash while maintaining more cash than debt on its balance sheet.

According to RBC Capital's analysis, Rivian is anticipated to experience over $9 billion in FCF losses from 2024 through 2028. Despite this, Rivian concluded 2024 with a cash and short-term investment (STI) balance of $7.7 billion. When factoring in its credit facility, the company's gross liquidity is expected to be around $9.1 billion. Rivian also reported that it is due to receive an incremental $4.32 billion in cash and loans from Volkswagen (ETR:VOWG_p) (VW) from 2024 to 2026, with $1 billion already received in June 2024. Financial health metrics from InvestingPro show a strong current ratio of 4.7, indicating the company's liquid assets well exceed its short-term obligations.

The company faces upcoming debt maturities, including $1.2 billion in 2026, $1.5 billion in 2029, and $1.725 billion in 2030. While there is the possibility that these may be refinanced, the repayment obligations are a consideration for the company's financial planning. Additionally, Rivian has secured a $6.6 billion loan from the Department of Energy (DOE), which is earmarked for capital expenditures and is disbursed as reimbursement for cash spent.

There is ongoing discussion among investors about whether the new U.S. administration might attempt to delay the DOE loan payouts to Rivian. Despite these concerns, RBC Capital's report suggests that Rivian could have adequate cash to support its operations through the launch of its R2 platform.

The analyst's note also touches on the importance of Rivian improving its Gross Profit margins, excluding regulatory credits, and expresses concern over the potential impact of changes to the Inflation Reduction Act (IRA) on Rivian's future R2 and R3 models, which are aimed at more price-sensitive customers. Recent data from InvestingPro shows concerning gross profit margins of -24.14% and negative EBITDA of $3.66 billion in the last twelve months. In light of these considerations, RBC Capital has aligned Rivian's valuation multiple with that of its peers, setting it at 1x Sales, down from the previous 1.3x, leading to the new price target of $10. For deeper insights into Rivian's financial health and additional ProTips, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

In other recent news, Rivian Automotive Inc. has reported its first-quarter vehicle delivery and production numbers, exceeding both its own guidance and analyst estimates. The company delivered 8,640 vehicles, surpassing estimates from Cantor Fitzgerald and Visible Alpha Consensus, while production reached 14,611 vehicles, topping Cantor Fitzgerald's forecast. Despite these achievements, Rivian's stock maintained a Neutral rating from Cantor Fitzgerald, reflecting caution due to ongoing tariff impacts on auto parts. In contrast, Canaccord Genuity has maintained a Buy rating with a $23 price target, expressing optimism about Rivian's potential to capitalize on market dynamics.

Meanwhile, Lucid Group (NASDAQ:LCID) faced setbacks as reports emerged of delays in the delivery of its Gravity SUV due to safety testing issues. Although interim CEO Marc Winterhoff assured that deliveries would start by the end of April, the anticipated volumes are expected to be low. This development has raised concerns among investors about Lucid's ability to meet production targets.

Tesla (NASDAQ:TSLA) also experienced a downturn after reporting delivery numbers below expectations, though the stock rebounded later on. Overall, these developments highlight the challenges and opportunities within the electric vehicle sector as companies navigate production hurdles and market demands.

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