On Friday, UBS downgraded shares of Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ:RIVN) from Buy to Sell and significantly reduced the price target to $8.00 from the previous $24.00. The investment firm adjusted its outlook due to a "rapidly changing EV backdrop," which has led to a reassessment of demand for Rivian's products and brand. The revised strategy now appears more challenging for Rivian as it works towards profitability and positive cash flow.
The downgrade reflects concerns about softer demand for U.S. battery electric vehicles (BEVs) and specifically for Rivian's offerings. UBS forecasts that Rivian's total deliveries for the years 2025, 2026, and 2027 will be approximately 75,000, 89,000, and 148,000 units, respectively. These figures represent an average decrease of around 33% from previous estimates and are roughly 42% below the consensus.
In addition to the lowered delivery projections, UBS also sees risks to Rivian's gross profit and EBITDA guidance for 2024. The firm anticipates a delay in Rivian reaching EBITDA and free cash flow (FCF) breakeven points. This adjustment in financial expectations comes as the market for electric vehicles continues to evolve and become more competitive.
UBS has also raised concerns about potential capital raises that Rivian might need to undertake. According to the firm, these could represent a significant portion of Rivian's current market capitalization, potentially amounting to approximately 30%. This anticipated need for additional capital could further pressure the automaker's financial position as it strives to establish itself in the competitive EV market.
The revised price target and stock rating reflect a more cautious stance on Rivian's ability to navigate the challenges in the current market environment. Rivian's journey towards profitability and positive cash flow appears to be fraught with more obstacles than previously anticipated by UBS.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.