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On Monday, Baird maintained its Outperform rating on Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ:RIVN) shares with a steady price target of $20.00, in spite of the electric vehicle maker's recent announcement of lower than expected third-quarter deliveries and a reduced production forecast for the full year of 2024. The company cited supply shortages of a key component used in both its R1 and RCV platforms as the reason for the adjustment.
Rivian's guidance for year-over-year delivery growth remains in the low single digits, a target that has been reaffirmed despite the production challenges. However, Baird analysts anticipate that this update may increase investor skepticism about Rivian's ability to achieve positive gross margins by the fourth quarter of 2024.
The firm highlighted two major areas of focus for Rivian that could act as catalysts for the company's stock: the detailed plan for improving margins and the specifics surrounding the joint venture with Volkswagen (ETR:VOWG_p). Both elements are seen as crucial in determining the future financial performance of Rivian.
As Rivian navigates the supply chain issues that have impacted its production outlook, the market's response to the company's strategies for margin improvement and its partnership with Volkswagen will be closely watched. These factors are expected to play a significant role in Rivian's trajectory toward profitability.
In other recent news, Rivian Automotive has sought federal aid to resume the construction of its $5 billion electric vehicle plant in Georgia. This initiative follows a challenging period for the company, which saw a reduction in its annual production forecast due to ongoing parts shortages.
Despite these challenges, Canaccord Genuity has maintained a Buy rating on Rivian's shares, while adjusting the price target to $28 from $30. At the same time, Stifel and RBC Capital have also retained their positive outlooks on Rivian, even as the company cut its production forecast for 2024.
Rivian, facing lower delivery numbers and production challenges, has revised its 2024 production forecast to between 47,000 and 49,000 vehicles. This change is attributed to a component shortage impacting both the R1 and RCV platforms. Despite these setbacks, the company has secured an investment of up to $5 billion from Volkswagen AG (OTC:VWAGY), which could bolster Rivian's financial position and assist in achieving its first gross profit by the final quarter of 2024.
In addition to these developments, Rivian is also planning to build another assembly plant in Georgia. This plan comes even as the company grapples with a fire at its Illinois plant and a pause in the production of its electric delivery vans due to the parts shortage. The company's recent actions and developments reflect its ongoing efforts to navigate these challenges and continue its operations.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Rivian's financial situation and market performance. Despite the production challenges mentioned in the article, Rivian's revenue growth remains strong, with a 68.2% increase over the last twelve months as of Q2 2024. This growth aligns with the company's guidance for year-over-year delivery growth, albeit in the low single digits.
However, InvestingPro Tips highlight some concerns that investors should consider. Rivian is "quickly burning through cash" and "suffers from weak gross profit margins," which supports Baird's anticipation of increased investor skepticism about achieving positive gross margins. The company's gross profit margin stands at -41.1% for the last twelve months, underscoring the importance of Rivian's plan to improve margins, as mentioned in the article.
The stock's recent performance has been challenging, with InvestingPro data showing a 21.09% decline over the past month and a 29.41% drop over the last three months. This aligns with the "Stock has fared poorly over the last month" InvestingPro Tip and may reflect investor concerns about the production forecast reduction.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Rivian, providing deeper insights into the company's financial health and market position.
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