Cantor Fitzgerald has reiterated its Overweight rating on Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ: RIVN), with a steady price target of $19.00.
The firm's analysis indicates that Rivian is on track to achieve a modest positive gross margin by the fourth quarter of 2024 and anticipates positive gross margins for the full year 2025.
Rivian reported a smaller-than-expected gross margin loss in the second quarter of 2024. The electric vehicle manufacturer recorded a gross margin of negative 39%, which was an improvement from the negative 44% in the first quarter of 2024 and better than Cantor Fitzgerald's estimated negative 41%.
Rivian's management has confirmed its goal to reach positive gross margins by the end of 2024, projecting a 1% gross margin for the fourth quarter.
The company also managed to reduce its gross loss per vehicle delivered to $32,705 in the second quarter of 2024, down from $38,784 in the previous quarter. This includes approximately $15,000 in depreciation and amortization expenses, along with $1,200 in stock-based compensation expenses.
Additionally, Rivian's adjusted EBITDA loss for the second quarter was approximately $860 million, which was favorable compared to both the firm's estimate and the FactSet consensus of $890 million and $852.9 million, respectively.
Rivian recently announced on June 25, 2024, its joint venture with Volkswagen (ETR:VOWG_p), which is expected to foster software technology development, electronic control units, and network architecture design.
Volkswagen's commitment includes an immediate $1 billion unsecured convertible bond, received in the second quarter of 2024, and an additional investment of approximately $4 billion, contingent upon the formation of the joint venture, anticipated to close in the fourth quarter of 2024.
This partnership is poised to enhance Rivian's financial stability, with Volkswagen planning to invest $2 billion in Rivian's common stock over two installments in 2025 and 2026 and provide a $2 billion investment and loan in 2026.
InvestingPro Insights
As Rivian Automotive Inc (NASDAQ:RIVN) continues its journey towards achieving positive gross margins, InvestingPro data reveals some key financial metrics that investors may find enlightening. The company's market capitalization stands at $14.73 billion, which is a reflection of investor sentiment and market confidence. Despite the challenges, Rivian has shown a remarkable revenue growth of 123.79% over the last twelve months as of Q1 2024, indicating a strong demand for its electric vehicles. However, with a gross profit margin of -40.63% in the same period, it underscores the cost pressures the company faces.
InvestingPro Tips suggest that while Rivian holds more cash than debt, indicating a solid balance sheet, it is quickly burning through cash. Analysts have also revised their earnings downwards for the upcoming period, which could be a sign of caution for potential investors. On a positive note, Rivian's liquid assets exceed its short-term obligations, providing some financial flexibility in the near term. For those looking to delve deeper into Rivian's financial health and future prospects, InvestingPro offers a comprehensive list of 11 additional tips on their platform.
These insights, coupled with Cantor Fitzgerald's analysis and the strategic joint venture with Volkswagen, paint a complex picture for Rivian's future. Investors considering Rivian's stock should weigh these factors carefully to gauge the potential risks and rewards associated with the electric vehicle maker's evolving financial landscape.
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