Rivian (RIVN) stock has rallied 36% year-to-date, driven by optimism about the electric vehicle maker’s upcoming R2 SUV and strong third-quarter results. Ahead of the company’s Autonomy and AI Day event on December 11, RBC Capital analyst Tom Narayan reiterated a Hold rating on RIVN stock with a price target of $14, saying that it is still a “show-me story.”
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Here’s Why RBC Capital Analyst Is Cautious on Rivian Stock
Narayan praised Rivian’s shift toward autonomy, as he believes that Level 3 will be a crucial move for all automakers. “Its goal of in-sourcing could make autonomy a profit center, which is important, especially given the company’s liquidity situation,” added the analyst.
Furthermore, he expects Rivian to adopt a subscription model like larger rival Tesla (TSLA), but with lower pricing. The analyst highlighted that this approach is in contrast to Mercedes (MBGAF) and BMW (BAMXF), which seem to be using autonomy to bolster their product offering rather than viewing it as a significant profit driver.
Narayan also likes the segments that Rivian is focused on. He finds Rivian’s initial consumer products, the R1T and R1S, “very impressive and category-defining.” However, Narayan noted that Rivian is still generating losses and could face intense competition from legacy original equipment manufacturers (OEMs). Moreover, the ongoing slowdown in the EV market adds to the company’s woes. While the Volkswagen (VWAGY) deal helped Rivian address liquidity issues, Narayan believes that the success of the R2/R3 models will be crucial for the company.
“All that said, while we see December 11’s event as important, being able to scale R2/R3 profitably will be far more critical for investors,” concluded Narayan.
Is Rivian Stock a Buy, Sell, or Hold?
Currently, Wall Street is sidelined on Rivian Automotive stock based on five Buys, eight Holds, and five Sells. The average RIVN stock price target of $13.98 indicates 22.6% downside risk.
