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Investing.com -- Guggenheim downgraded Rivian (NASDAQ:RIVN) to Neutral from Buy in a note to clients on Monday, citing increased concerns about long-term demand, pricing, and U.S. policy headwinds that challenge its bullish outlook for the company’s future R2 and R3 models.
“We are updating numbers post-RIVN 2Q deliveries and lowering our rating… to reflect softer long-term R2/R3 assumptions driven by both softer R1 sales and negative U.S. Electric Vehicle and Emissions policy changes,” Guggenheim analysts wrote.
The firm said it no longer has “confidence in the required volumes and/or required ASPs to support our prior price target,” despite maintaining belief in Rivian’s cost-reduction goals for its upcoming R2 model.
Rivian’s weakening R1 demand is now seen as a “modest negative” for R2 and R3 volume projections.
In particular, the expiration of electric vehicle incentives under the “One Big Beautiful Bill” is expected to hurt pricing and volumes.
“The loss of EV incentives is likely to negatively impact long-term ASP and/or volume potential as well.” Guggenheim has trimmed its 2028 unit forecast to 150,000, down from 185,000 previously.
Although the firm acknowledged possible positive offsets, such as auto interest deductions and potential market share gains if competitors abandon their EV plans, it does not believe these are “large enough to offset the negative ramifications from lost consumer credits.”
Additionally, reduced emissions credits are expected to lower Rivian’s future earnings and free cash flow, leading Guggenheim to cut its DCF valuation by nearly $2 per share.
With its price target removed, the firm now sees fair value at around $13 per share.