On Wednesday, Deutsche Bank adjusted its outlook on Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ:RIVN), reducing the price target to $16.00 from the previous $19.00, while keeping a Hold rating on the stock. The bank's revision reflects concerns over the electric vehicle maker's ability to meet its production and profitability goals for 2024, as well as potential demand challenges.
The decision to lower the price target follows a series of indicators suggesting a softer demand for Rivian's vehicles. The introduction of leasing options for the R1S model, the absence of wait times indicating a buildup of inventory, and the launch of the cheaper Standard battery pack ahead of planned improvements are seen as signs of demand constraints. These factors have led to expectations of deeper losses and increased cash burn for the company.
Deutsche Bank has maintained its delivery forecast for Rivian at 65,000 units in 2024, indicating the company's focus on volume. However, the bank has now projected a gross margin of -13% for the year, a significant drop from the previously estimated -4%. Additionally, the forecast for Ebitda has been revised to a loss of $3.2 billion from $2.8 billion, falling short of the consensus.
The bank also revised down its delivery expectations for 2025 and 2026, resulting in lower revenue forecasts for the next three years. The new projections are $5.2 billion for 2024, $7.0 billion for 2025, and $11.9 billion for 2026, down from previous estimates of $6.0 billion, $9.9 billion, and $14.9 billion, respectively.
The upcoming March 7 unveiling of Rivian's next-generation, more affordable R2 vehicle is anticipated to generate interest. However, with production not starting until 2026, there are concerns about potential customer frustration and the possibility of the new model cannibalizing sales of the existing R1.
In summary, Deutsche Bank has recalibrated its price target for Rivian to $16, based on 1.2 times its revised lower 2026 revenue estimates, and has reiterated its Hold rating on the company's shares.
InvestingPro Insights
As investors digest the latest outlook from Deutsche Bank on Rivian Automotive Inc (NASDAQ:RIVN), real-time data from InvestingPro provides additional context to the electric vehicle maker's financial health and market performance. Rivian's market capitalization stands at $14.73 billion, indicating the scale at which it operates within the automotive industry. Despite a significant revenue growth of 260.53% in the last twelve months as of Q1 2023, the company's gross profit margin remains deeply negative at -64.09%, underscoring the challenges it faces in achieving profitability.
InvestingPro Tips suggest that analysts are expecting sales growth in the current year, which aligns with the company's focus on volume as maintained by Deutsche Bank. However, Rivian's stock price has been quite volatile, with a 6-month total return of -28.66%, reflecting investor skepticism about the company's near-term financial prospects. The lack of profitability over the last twelve months and a weak gross profit margin contribute to the cautious stance taken by analysts, who do not anticipate the company will be profitable this year.
For investors seeking a deeper analysis, InvestingPro offers additional insights on Rivian, including the company's cash position relative to debt and its ability to cover short-term obligations. With the use of coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to a total of 12 InvestingPro Tips that can help navigate the complexities of Rivian's financial landscape.
Considering the recent price target revision and the company's upcoming product unveilings, these InvestingPro metrics and tips may prove invaluable for investors looking to make informed decisions about Rivian's stock.
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