Rivian Automotive (NASDAQ:RIVN) boasts a logo inspired by a compass, symbolizing the company’s ‘promise to always point you in the right direction.’ And yet, after watching its stock tumble more than 50% in 2024, one can be forgiven for asking which direction Rivian itself is headed.
Several factors have driven the EV maker’s stock down this year. Disappointing 4Q23 delivery numbers set the stage for early 2024 declines, a trend that has only worsened with the recent release of 3Q24 figures, which show a 36% year-over-year drop in deliveries.
Moreover, Rivian continues to lose money on every vehicle sold, and to make matters worse, the company plans to slow manufacturing in the second half of FY2025 to prepare for its more affordable R2 model, which is likely to result in further declines in production and deliveries next year.
Given these headwinds, investor Johnny Zhang isn’t expecting Rivian’s compass to point north anytime soon.
“Due to the growth headwinds extending into FY2025, I believe the stock’s recent selloff is justified and did not present an attractive buying opportunity,” Zhang opined.
Zhang highlighted Rivian’s declining production numbers, exacerbated by supply shortages from a key supplier. He anticipates this will persist into 4Q24, with expected delivery numbers of 13,979, signaling stagnant year-over-year growth.
In addition, the company’s focus on increasing sales has led to ballooning debt, which the investor notes has “surged 103% YoY to $5.5 billion.” Meanwhile, the company’s cash and cash equivalents have declined 38% year-over-year.
This could hit the company hard, notes Zhang, especially if the Fed does not act to aggressively cut interest rates and RIVN needs to raise additional capital to fund its increasing capex costs in FY2025.
“I do not expect RIVN to achieve FCF breakeven anytime soon,” writes Zhang, adding that the market does not predict that RIVN will enjoy major growth in the coming fiscal year.
“Given the lack of immediate growth catalysts and the ongoing uncertainty surrounding supply shortages,” Zhang is assigning Rivian a Hold rating (i.e. Neutral). (To watch Zhang’s track record, click here)
As for Wall Street’s take? Analysts give Rivian a Moderate Buy consensus rating, based on 19 reviews – 9 Buys and 10 Holds. The average price target of $17.63 suggests potential upside growth of ~70% over the next year. (See RIVN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
