By Michael Elkins
Morgan Stanley reiterated an Overweight rating and $26.00 price target on Rivian (NASDAQ:RIVN) as the automaker targets 50k units of production in 2023. When Tesla (NASDAQ:TSLA) crossed the 50k unit milestone in 2015, it earned a positive 21.3% gross margin. However, analysts estimate a negative 68% gross margin for Rivian.
Morgan Stanley spoke with management last week to discuss some of the unique circumstances to consider when comparing Rivian’s current operating metrics to that of Tesla back in 2015 when it crossed the 50k threshold.
Rivian’s 50k units this year are spread across two different production lines at their Normal plant that is designed for a significantly higher scale of production capacity (150k units). This contributes to some of the inefficiency in RIVN numbers relative to TSLA in 2015. There have also been a number of variable cost headwinds that Rivian faces, such as the lithium spot price, which was less than $8k/ton in 2015 compared to over $50k today.
Separately, Morgan Stanley distributed a survey to institutional investors and industry experts. Results showed that 43% of respondents believe Rivian should pursue a more offensive approach to commercialize R2 ASAP, while 39% of responses recommended Rivian pursue strategic alternatives. When asked to compare Rivian to rival companies like Tesla and Lucid (NASDAQ:LCID), a substantial majority (79%) of respondents believe Tesla will be the best performer through year-end.
Shares of RIVN and TSLA are up 1.02% and 1.05% respectively in pre-market trading on Tuesday.