On Monday, Truist Securities adjusted its stance on Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ:RIVN), moving its rating from Buy to Hold and significantly reducing the price target to $11 from the previous $26. The revision follows an announcement by Rivian regarding a planned multi-week shutdown during the second quarter to upgrade its Normal facility's R1 production line.
"Planned shutdown effect worse than anticipated", Truist Securities analyst comments.
Rivian's updated production guidance for FY24 is set at 57,000 vehicles, which falls short of both Truist's and the broader market's expectations, which were at 64,000 and 80,000 vehicles respectively. This would result in no year-over-year growth, although it's important to note that the average market estimate was 66,000 vehicles, considering a significant outlier in the calculations.
Management at Rivian has cited the upcoming production halt and a supplier issue in the first quarter as key factors in the slowdown, with the latter expected to be resolved by April.
The supplier issue encountered in the first quarter is predicted to delay the completion of several thousand vehicles by the end of the quarter. Rivian anticipates that the problem will be rectified by April, but the impact on production numbers is already being felt. The company has communicated the multi-quarter effects that the shutdown will have on R1 production, indicating a slower ramp-up period once operations resume.
Truist's revised outlook also takes into account potential headwinds that could affect customer demand for Rivian's products. These include the anticipation for the R2 model, high interest rates, and geopolitical uncertainties. These factors are expected to pose challenges to demand in the 2024 and 2025 period leading up to Rivian's next vehicle launch, despite Truist's continued belief in the long-term growth of electric vehicles.
InvestingPro Insights
In light of Truist Securities' recent downgrade of Rivian Automotive Inc (NASDAQ:RIVN), it's worth considering the financial health and market sentiment surrounding the company. InvestingPro data shows a market cap of $9.75 billion USD for Rivian, with a significant revenue growth of 167.43% over the last twelve months as of Q4 2023. Despite this growth, the company's gross profit margin stands at -45.78%, indicating substantial costs outweighing revenue.
InvestingPro Tips shed light on the challenges Rivian faces. The company holds more cash than debt, which is a positive sign for its balance sheet. However, the stock is experiencing high volatility, as evidenced by a 38.22% drop in the price total return over the last week. Analysts have also revised their earnings downwards for the upcoming period, reflecting concerns about the company's profitability.
Investors considering Rivian's stock should note that while the company is quickly burning through cash, it does have liquid assets exceeding short-term obligations. This could provide some cushion against operational hiccups. Yet, the stock's performance has been poor over the last month, with a 34.14% decline in price total return, and it is currently trading near its 52-week low.
For a deeper dive into Rivian's financials and to access additional insights, visit https://www.investing.com/pro/RIVN. There are over 17 InvestingPro Tips available for Rivian, offering a comprehensive look at the company's financial health and market performance. To enrich your investment strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and unlock the full potential of InvestingPro's analysis tools.
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