Tuesday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ:RIVN), lowering the price target to $13 from $14 while sustaining a Hold rating on the stock.
"All in, we update our model to reflect Q3 deliveries and lower production outlook," said the analysts.
The bank's analyst cited concerns about whether Rivian could achieve a positive gross margin in the fourth quarter of 2024, given ongoing supply chain challenges.
The analyst's revised model now sets the third-quarter revenue estimate at $867 million, a decrease from the previous $951 million prediction and below the market consensus of $1,088 million. For the full year, the delivery forecast has been adjusted to approximately 51,000 units, with projected revenues at $4.4 billion and EBITDA at a loss of $2.7 billion. The analyst also noted a reduction in the 2025 delivery estimate to 56,000 units from 62,000, anticipating that supply issues could extend into the fourth quarter.
The lowered price target reflects these updated estimates and is based on a multiple of 1.5 times the projected 2027 enterprise value-to-revenue. The analyst expressed a need to monitor the company's earnings report, scheduled for November 7th, to gain further insight into the expected timeline for resolving these supply chain issues.
In other recent news, Rivian Automotive has experienced a series of developments, including lower-than-expected third-quarter vehicle deliveries and a reduction in its 2024 production forecast. The electric vehicle manufacturer delivered approximately 10,000 vehicles in the third quarter, marking a decrease compared to previous periods. This figure fell short of estimates from Goldman Sachs (NYSE:GS) and the Visible Alpha Consensus Data. Rivian also revised its 2024 production forecast to between 47,000 and 49,000 vehicles, a reduction from the previously anticipated 57,000 units, due to ongoing supply chain constraints.
Despite these challenges, Rivian maintained its delivery guidance, expecting a low single-digit year-over-year growth. Furthermore, the company has secured an investment of up to $5 billion from Volkswagen (ETR:VOWG_p), which could bolster its financial position. Rivian is also seeking federal aid to resume the construction of its $5 billion electric vehicle plant in Georgia.
Analysts from Goldman Sachs, Baird, Canaccord Genuity, and Stifel have maintained their respective ratings on Rivian's stock, indicating a steady outlook despite the recent production and delivery challenges.
InvestingPro Insights
Recent InvestingPro data and tips offer additional context to Deutsche Bank's analysis of Rivian Automotive Inc. The company's market cap stands at $10.58 billion, reflecting the market's current valuation amid the challenges outlined in the article.
An InvestingPro Tip highlights that Rivian is "quickly burning through cash," which aligns with Deutsche Bank's concerns about the company's financial performance. This is further supported by the data showing a significant operating loss, with an operating income margin of -117.27% for the last twelve months as of Q2 2024.
Another relevant InvestingPro Tip notes that Rivian "suffers from weak gross profit margins." This is corroborated by the reported gross profit margin of -41.1% for the same period, underscoring the analyst's doubts about Rivian achieving positive gross margins by Q4 2024.
Despite these challenges, Rivian has shown strong revenue growth, with a 68.2% increase over the last twelve months. However, the quarterly revenue growth has slowed to 3.3%, which may reflect the supply chain issues mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Rivian, providing a broader perspective on the company's financial health and market position.
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