Rivian Stock Down 20% in Past Week — But Why, Really?

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I listened to Rivian’s shareholder name final week to see what I may study Rivian’s current previous, current, and future. There was a number of give attention to the coming R2which is predicted to be the corporate’s (NASDAQ:RIVN) first really mass-market mannequin, however it felt a bit of bit just like the give attention to the R2 was to keep away from another matters (i.e., pretty weak gross sales targets for 2025). There was additionally an emphasis on the corporate’s plans to create even better advanced driver assist systems (ADAS)however with out getting near the much-hyped purpose different corporations have of robotaxi-level self-driving. Whereas I believe it’s admirable to listen to what the corporate is doing, and every thing the corporate has completed up till now would provide the expectation that Rivian’s continued ADAS work shall be very fastidiously and successfully carried out, you’re simply not going to get buyers very enthusiastic about non-robotaxi-level ADAS today.

There have been a number of good issues in Rivian’s shareholder replace, and one may undoubtedly argue there was extra good than unhealthy. Nevertheless, the inventory is down 20% within the final 5 days, and this text is meant to give attention to why that’s, so let’s wrap that up first. The straightforward purpose why the inventory collapsed have to be Financial institution of America analysts downgrading the inventory and placing it within the “sell” class. It stands out from the group in doing that, however buyers could also be scared that is simply the primary main analyst to get so unfavourable on the inventory and others will comply with. Financial institution of America’s reasoning for the “sell” suggestion is a weaker than anticipated 2025 gross sales goal (as briefly talked about above), a weakened EV market because of the Trump administration’s anti-EV stance, rising competitors from different EV corporations in addition to legacy automakers, and the issue of scaling up manufacturing and demand sufficient — and effectively sufficient — to begin turning a revenue throughout the coming yr. Because of all that, Financial institution of America moved its RIVN value goal from $13 to $10, fairly a drop, and moved from “neutral” to “sell.” Although, all of this might simply be short-term buying and selling (together with from bots) and maybe the inventory will bounce again earlier than lengthy.

So, let’s transfer on to a few of the optimistic information from Rivian and why a number of main analysts have the inventory as a “buy” quite than a “sell” or perhaps a impartial “hold.” Listed here are some optimistic factors:

• Rivian’s internet loss in This autumn 2024 dropped 51% in comparison with This autumn 2023, from $1.521 billion to $744 million, and the corporate has ongoing plans to additional lower losses and ultimately make a revenue.
• This autumn 2024 income grew 32% in comparison with This autumn 2023, from $1.3 billion to $1.7 billion.
• Throughout all of 2024, the corporate’s internet loss declined by 12.6% in comparison with 2023, from $5.432 billion in 2023 to $4.747 in 2024.
• Moreover, for 2025, the corporate expects an adjusted EBITDA lack of $1.7–1.9 billion, a major drop in comparison with 2024 and 2023. (In fact, that’s nonetheless a notable loss, however the firm is headed in the fitting route and has the money to cowl these ongoing losses.)
• Rivian has extra cash than debt, and it expects to achieve R2 manufacturing with out operating into monetary challenges.
• Rivian achieved positive gross profit within the 4th quarter of 2024 and it expects to achieve optimistic gross revenue throughout the entire of 2025. Its 4th quarter gross revenue outcomes have been higher than anticipated, reaching $170 million gross revenue, and it was the primary quarter that Rivian achieved optimistic gross revenue.
• A part of Rivian’s achievement reaching optimistic gross revenue got here from appreciable value reductions, and executives spoke concerning the firm’s ongoing give attention to such value reductions on the shareholder and analyst convention name.
• Rivian execs additionally talked about the company’s rising partnership with Volkswagenwhich may very well be a essential short-term, medium-term, and long-term partnership for Rivian.
• Executives on the decision additionally famous that Rivian was began to promote its commercial electric vehicles to supply corporations past Amazon and different business entities (corresponding to electricians, plumbers, florists, canine groomers, and dry cleaners). There appears to be appreciable demand for Rivian’s electrical vans, and that shouldn’t actually shock anybody when Amazon agreed to purchase 100,000 of them and has been adding them to the company’s fleet quite rapidly.
• Rivian execs additionally famous rising income from promoting regulatory credit, one thing that would proceed rising as the corporate achieves extra gross sales and maybe additionally if Tesla sales continue to decline.
• The corporate additionally not too long ago secured a US Department of Energy loan for several billion dollars (simply in time).

Analysts at Stifel have a “buy” ranking on RIVN and a value goal of $16. Guggenheim Securities additionally has a “buy” ranking and value goal of $16 on the corporate. Benchmark has a “buy” ranking and a value goal of $18 on the corporate. Needham has a “buy” ranking on RIVN and raised its value goal to $17. DA Davidson, in the meantime, maintained a “neutral” ranking and has a value goal of $13 on the corporate (which, admittedly, is now above the $11.45 the inventory is at after falling 20% previously 5 days).

Total, regardless of all of the variance in value targets and Financial institution of Americas Securities now placing a “sell” suggestion on the corporate, it seems analysts are largely in settlement that Rivian posted optimistic numbers and enchancment in 2024, however client demand is unsure and there are issues about 2025 targets. Additionally, as everybody is aware of, it’s not simple to ramp up manufacturing of a mass-market mannequin, particularly your first one. Whereas Rivian has massive plans for the R2 (to not point out the even cheaper and smaller R3), these may come crashing down if issues don’t go properly in quite a lot of completely different arenas. Moreover, there’s nice uncertainty about the place the US economic system is headed typically, particularly with so many unprecedented, unpredictable, dangerous, and downright dangerous modifications coming from the Trump administration and “shadow president” Elon Musk, who, after all, occurs to be the CEO of Rivian rival Tesla.

Whereas Rivian’s inventory value dropped 20% previously week, is down virtually 11% going again one month, and can be down ~20% going again 6 months, it must be famous that the inventory is up 7% going again one yr. I believe the takeaway with Rivian is you can take a look at it in an optimistic gentle, seeing its progress, its potential, and the large upside if it achieves its objectives; or you may take a look at it extra pessimistically, specializing in the challenges and uncertainty within the US EV market, the issue scaling up a mass-market mannequin, the questionable political and financial surroundings within the subsequent couple of years, and simply how exhausting it’s to change into a worthwhile firm, particularly within the auto enterprise. Which aspect do you tackle all of that?

Disclosure: I don’t maintain any shares of RIVN, and I’m having a tough time deciding whether or not I’m bullish or bearish on the corporate’s coming yr — see the earlier paragraph or the total article above for an reason.