In a significant development for electric adventure vehicle maker Rivian (RIVN), Stifel Bulls on Rivian with a Buy rating and an optimistic $23 price target. This move has fueled a surge in Rivian stock as investors react positively to the investment bank’s assessment of the company’s future prospects.
Stifel analyst Stephen Gengaro, in a comprehensive note, outlined several bullish factors that contribute to the favorable rating. Among them, the analyst highlighted the “high-quality” R1 vehicles, which are instrumental in driving brand awareness. Additionally, the previous order of 100,000 electric delivery vehicles (EDVs) from Amazon and the expansion of EDV purchases to other commercial fleets are seen as positive indicators of strong demand.
The upcoming R2 platform is identified as a potential strong competitor to Tesla’s Model Y, adding to the positive sentiment. Gengaro emphasized the prospect of margin expansion, citing new technologies such as Rivian’s in-house Enduro motors and a new battery pack, improved pricing, and enhanced supplier agreements, among other factors.
Despite the overall positive outlook, Gengaro acknowledged certain headwinds that Rivian may face, including the current macroeconomic environment, high interest rates, and concerns about cash burn. Nevertheless, the Stifel team maintains a bullish stance on electric vehicles (EVs) in general, expressing confidence that obstacles facing EV sales, such as range anxiety, vehicle costs, model availability, and charging infrastructure, will diminish over the next few years.
Stifel’s endorsement comes at a time when Rivian has experienced positive momentum in recent months. The automaker reported third-quarter results that surpassed expectations, prompting an increase in its full-year production forecast to 54,000 units from the earlier projection of 52,000 units. Additionally, Rivian narrowed its full-year adjusted EBITDA loss to $4.0 billion from $4.2 billion and reduced its 2023 capital expenditure guidance to $1.1 billion.
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This string of positive developments has driven Rivian’s stock higher by 23% over the past month, resulting in a 2.4% gain for the year. However, challenges lie ahead on Rivian’s path to profitability. Piper Sandler analyst Alexander Potter pointed out the company’s substantial adjusted loss of $942 million in the last quarter, translating to over $60,000 lost on each vehicle sold, given the delivery of approximately 16,300 vehicles.
While Rivian maintains a forecast of positive gross profit by 2024, analysts caution that the company faces a challenging two-plus-year execution plan with potential risks of delays and cost overruns. CEO RJ Scaringe and the Rivian team are tasked with navigating these challenges to achieve sustained success and profitability.
Shares of Rivian and Lucid Group Garner New Ratings
Adding further excitement to the EV space, Stifel’s coverage also extended to Lucid Group, another electric vehicle startup. Lucid received a Hold rating with a $5 price target from Stifel analyst Stephen Gengaro. Lucid’s positive aspects include its attractive vehicles and substantial backing from the Saudi Public Investment Fund, which holds a significant 60.6% stake in the company.
While Lucid has seen success in vehicle sales, having sold about 4,300 vehicles in the first three quarters of 2023, it faces challenges in terms of lower-priced vehicles, which are projected to be two to four years away. In comparison, Rivian has sold approximately 36,000 vehicles, reflecting its stronger position in the market.
Analysts note that Stifel’s ratings for Rivian and Lucid align with the sentiments of their peers. Nearly 70% of analysts covering Rivian stock rate it as a Buy, while only 6% of analysts covering Lucid have a Buy rating.
Stock Performance and Industry Dynamics
Rivian’s stock responded positively to Stifel’s Buy rating, rising about 2.4% to $18.82 per share in premarket trading. In contrast, Lucid’s stock, which has been under pressure, gained 1.4% to $4.47 per share. Lucid’s stock had declined almost 50% over the past 12 months, and Rivian shares were down about 34%. Factors such as higher interest rates and increased competition in the EV market have affected investor enthusiasm for startups that have yet to achieve profitability.
The broader electric vehicle sector has faced challenges, including macroeconomic factors, EV-specific headwinds, and increased competition. Stifel’s outlook suggests that these hurdles will likely diminish over the next few years, paving the way for growth in EV sales. This positive outlook is encouraging for all players in the electric vehicle space.
Conclusion: Navigating Challenges in a Dynamic Industry
As Rivian charges ahead with Stifel’s Buy rating and Lucid aims to address challenges on its path, the electric vehicle industry continues to evolve. The strategic moves, product innovations, and responses to industry dynamics by companies like Rivian and Lucid will significantly influence market perceptions and investor confidence.
The path to profitability remains a critical aspect for these companies, and both Rivian and Lucid will need to demonstrate effective execution of their plans to secure long-term success. As the electric vehicle sector matures, investors and industry observers will closely monitor how these companies navigate challenges and capitalize on opportunities, shaping the future landscape of the rapidly growing EV industry.
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