Following disappointing fourth-quarter results and 2024 guidance, Rivian Automotive (NASDAQ:RIVN) limped into Friday's open success with a double UBS rating downgrade.
The Swiss bank cut the electric vehicle maker's rating to Sell from Buy and cut its price target by more than 60% to just $8, 30% below Thursday's closing price.
After Thursday 25.6% lossRIVN shares are drops another 3% in pre-market trade.
“The rapidly changing electric vehicle environment is causing us to re-evaluate our view on demand and makes RIVN's current strategy quite onerous on the path to profitability and cash flow,” UBS said in Friday's research report. .
The bank sees the vertical integration strategy as making sense in an effort to gain long-term structural advantage, but it is costly and clashes with the realities of slower demand for electric vehicles and a “very” different capital market environment. for electric vehicles. UBS wonders how long management will be able to maintain this strategy.
Regarding the slowing EV demand environment and current operating expense plans, UBS raised its timeline for Rivian (RIVN) to reach EBITDA profitability through 2027 from 2026 and free cash flow breakeven to a few years after that.
Additionally, the bank reduced its delivery forecast for 2025, 2026 and 2027 by 33% on average to 75,000, 89,000 and 148,000, respectively. And while Rivian (RIVN) forecasts gross margin to be positive for the fourth quarter of this year, UBS predicts fourth quarter gross margin to be -10% and only modestly positive by 2025.
“While we remain positive on the company's products and brand, RIVN remains a loss-making, cash-burning company. U.S. EV demand is slowing and we see other potential impediments to EV demand that make investing in an emerging EV OEM challenging,” UBS said.
