Rivian Automotive Price Target Lowered by Barclays From Investing.com

Barclays revised its financial outlook for Rivian Automotive (RIVN) on Friday, lowering its price estimate for the electric vehicle maker’s stock from $12 to $10 and maintaining a Neutral rating. The revaluation is due to the fact that the automaker is facing a period of more limited financial resources, which will likely slow the growth of production numbers.

Barclays pointed out that Rivian’s decision to begin production of the R2 model at the Normal plant and to delay construction of the Georgia plant are major factors in this review. This approach should reduce the need for additional financing, but it also postpones Rivian’s expansion into large-scale production. The company cut its production forecast for the end of the decade, citing weaker demand for the R1 model and Rivian delivery vehicles, as well as a slower ramp-up of R2 model production.

Cost cutting is a key focus for Rivian as it seeks to weather the downturn in the electric vehicle market, which has led to a 58% decline in its stock price since the start of the year, a significant underperformance compared to 6% increase in the S&P 500. The move to a neutral rating came in February after seeing weakening demand for Rivian’s R1S model. Furthermore, a disappointing production forecast for 2024, which did not foresee any growth in production compared to the previous year, negatively affected investor confidence.

Faced with these obstacles, Rivian changed its strategy, delaying construction of the Georgia plant and choosing to start initial production of the R2 model at an expanded site in Normal. This plan aims to move the start of production of the R2 model to the first half of 2026, ahead of the initial target of the second half of 2026 in Georgia. This adjustment is also expected to reduce capital spending by $2.25 billion, which includes investments in capital, product and supplier expenses.

While Barclays recognizes the strengths of Rivian’s management decisions, the bank also notes the resulting tradeoffs, particularly the postponed opportunity to scale production due to the postponement of the Georgia plant. The bank expects reduced production capacity for Rivian until at least the end of the decade. Despite these changes and the reduction in share price estimates, Barclays believes Rivian’s long-term prospects as a fully integrated electric vehicle manufacturer are still strong, leading to maintaining the Neutral rating.

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