Rivian Inventory Down 20% in Previous Week — However Why, Actually?

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I listened to Rivian’s shareholder name final week to see what I might find out about Rivian’s latest previous, current, and future. There was a whole lot of give attention to the approaching R2, which is predicted to be the corporate’s [NASDAQ:RIVN] first actually mass-market mannequin, nevertheless it felt just a little 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 higher superior driver help methods (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 part the corporate has carried out up till now would provide the expectation that Rivian’s continued ADAS work can be very rigorously and successfully carried out, you’re simply not going to get traders very enthusiastic about non-robotaxi-level ADAS as of late.

There have been a number of good issues in Rivian’s shareholder replace, and one might positively argue there was extra good than dangerous. Nonetheless, 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 easy cause why the inventory collapsed have to be Financial institution of America analysts downgrading the inventory and placing it within the “promote” class. It stands out from the gang in doing that, however traders could also be scared that is simply the primary main analyst to get so destructive on the inventory and others will comply with. Financial institution of America’s reasoning for the “promote” advice is a weaker than anticipated 2025 gross sales goal (as briefly talked about above), a weakened EV market as a result of 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 inside the coming 12 months. Because of all that, Financial institution of America moved its RIVN worth goal from $13 to $10, fairly a drop, and moved from “impartial” to “promote.” 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 number of the optimistic information from Rivian and why a number of main analysts have the inventory as a “purchase” quite than a “promote” or perhaps a impartial “maintain.” Listed below 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 big drop in comparison with 2024 and 2023. (In fact, that’s nonetheless a notable loss, however the firm is headed in the suitable course and has the money to cowl these ongoing losses.)
• Rivian has more money than debt, and it expects to achieve R2 manufacturing with out working into monetary challenges.
• Rivian achieved optimistic gross revenue 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 had 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 concerning the firm’s rising partnership with Volkswagen, which may very well be a vital short-term, medium-term, and long-term partnership for Rivian.
• Executives on the decision additionally famous that Rivian was began to promote its industrial electrical automobiles to supply corporations past Amazon and different industrial entities (similar 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 including them to the corporate’s fleet fairly quickly.
• 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 gross sales proceed to say no.
• The corporate additionally not too long ago secured a US Division of Vitality mortgage for a number of billion {dollars} (simply in time).

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

Total, regardless of all of the variance in worth targets and Financial institution of Americas Securities now placing a “promote” advice 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 considerations about 2025 targets. Additionally, as everybody is aware of, it’s not straightforward to ramp up manufacturing of a mass-market mannequin, particularly your first one. Whereas Rivian has huge plans for the R2 (to not point out the even cheaper and smaller R3), these might come crashing down if issues don’t go nicely in quite a lot of totally different arenas. Moreover, there may be nice uncertainty about the place the US financial system is headed basically, particularly with so many unprecedented, unpredictable, dangerous, and downright dangerous modifications coming from the Trump administration and “shadow president” Elon Musk, who, in fact, occurs to be the CEO of Rivian rival Tesla.

Whereas Rivian’s inventory worth dropped 20% prior to now week, is down nearly 11% going again one month, and can be down ~20% going again 6 months, it needs to be famous that the inventory is up 7% going again one 12 months. I believe the takeaway with Rivian is that you could have a look at it in an optimistic gentle, seeing its progress, its potential, and the large upside if it achieves its targets; or you may have 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 setting within the subsequent couple of years, and simply how onerous 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 12 months — see the earlier paragraph or the complete article above for an reason.