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Rivian Automotive
stock was downgraded on Thursday. The company needs new models to maintain growth and new models are years away.
Wolfe Research analyst Rod Lache downgraded Rivian stock to Hold from Buy. Lache doesn’t have price targets for Hold-rated stocks. A Hold rating, for him, essentially means that Rivian shares should keep up with the market.
Shares were down 0.4% to $23.23 in premarket trading, while
S&P 500
and
Nasdaq Composite
futures both traded flat. It’s a small move for a downgrade, but Rivian stock has had a rough start to the year.
Shares dropped 10.1% after the company reported better-than-expected production figures on Jan. 3. The move left Canaccord analyst George Gianarikas confused, calling the results fine in a research report. But Rivian stock was up about 40% in December. Profit-taking was part of the decline. Share dropped another 3.7% on Wednesday.
For Lache, the downgrade is about demand. He has been impressed with the improvement Rivan has made to its production system. Rivian produced 57,232 units in 2023, up from 24,337 in 2022. Still, he isn’t sure growth will be as strong in 2024 and 2025, the years before Rivian’s second-generation of vehicles is ready. That’s called the R2 platform.
Today’s R1T truck and R1S SUV are built on what Rivian, unsurprisingly, calls its R1 platform. The R2 vehicles should be less expensive. The strategy is similar to what
Tesla
did, selling the higher-priced Model S and X, then launching the more affordable Model 3 and Y.
Rivian sold 50,122 units in 2023, up from 20,332 units in 2022. Growth in 2023 wasn’t an issue. Buta R1 Rivian vehicle can cost some $80,000 and the luxury end of the U.S. EV market is getting saturated. Roughly 25% of all the luxury cars sold in the U.S. in the third quarter were all-electric. (Telsa is considered a luxury car maker).
Growth could get tougher for Rivian with only expensive EVs. Rivian sales grew more than 150% in 2023. Wall Street expects that rate to decelerate to below 50% on average between 2024 and 2025, and then reaccelerate to roughly 55% in 2026 and 2027 when the R2 platform arrives.
Overall in 2023, Americans bought some 1.1 million all-electric vehicles up about 45% from 2022. EV sales rose closer to 65% in 2022 from 2021. Rivian’s market share of EV sales came in at about 5%, up from 3% in 2022.
With the new Hold rating, about 67% of analysts covering the company rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is about $26, up roughly 25% from recent levels.
Write to Al Root at [email protected]
Read the full article here
