Recently, Rivian Automotive saw a significant drop in its stock price following the announcement of their plans to raise additional capital. Analysts have been closely monitoring the situation, and one in particular, Battle Road Research analyst Ben Rose, has downgraded Rivian shares from Hold to Sell. This downgrade comes as Rose predicts that the company's stock will underperform compared to the broader stock market.
Delivery Figures and Revenue Expectations
Despite Rivian's third-quarter delivery figures surpassing expectations with 15,564 units delivered compared to the estimated 14,000 units, there is still cause for concern. The numbers fell slightly below what Rose had anticipated. Additionally, Rivian reported preliminary third-quarter results that revealed lower-than-expected revenue. The company expects revenue to be around $1.31 billion, which is $70 million less than what Wall Street had projected.
Declining Cash Balance
Another aspect that has affected Rivian's stock rating is the decline in their cash balance. At the end of the third quarter, the company's cash balance stood at $9.1 billion, showcasing a decrease of approximately $1.1 billion compared to the second quarter. This decline is significant as Rivian has been consistently utilizing around $1.7 billion in cash each quarter.
Weaker Than Expected Performance
The preliminary numbers reported by Rivian were weaker than what Rose had initially anticipated. These unexpected figures have led to a downgrade in the stock's rating. Investors were caught off guard as a capital raise was not anticipated.
These recent developments have caused concern for Rivian Automotive's future performance in the stock market. It will be interesting to see how the company addresses these challenges and works towards regaining investor confidence.
Rivian Faces a Challenging Road Ahead
In a recent report, analyst Rose raised concerns about Rivian's financial situation, engineering and production challenges, capacity strategy, and the competitive nature of the sector. Furthermore, Rose highlighted how the company's cost-cutting efforts have proven to be a significant obstacle.
Despite the downgrade, Rivian has not yet responded to requests for comment. Interestingly, the stock hasn't been heavily impacted by the announcement. As of midday Friday, Rivian's stock was up 0.8%, while both the S&P 500 and Nasdaq Composite showed gains of 1.1% and 1.3% respectively. However, the true damage occurred on Thursday when shares plunged nearly 23%, completely erasing all year-to-date gains.
Currently, approximately 58% of analysts covering Rivian rate the stock as a Buy, slightly higher than the average Buy-rating ratio for S&P 500 stocks at around 55%. While a downgrade from Hold to Sell does not directly affect the Buy-rating ratio, it does impact the Sell-rating ratio. Presently, approximately 8% of analysts rate Rivian shares as Sell, which is slightly higher than the average Sell-rating ratio for S&P 500 stocks at around 7%.
Despite recent setbacks, the average analyst price target for Rivian shares stands at $29, reflecting a potential increase of approximately 55% from current levels.
Over the past year, Rivian's shares have dropped by about 50%. Increasing interest rates and fierce competition in the electric vehicle market have dampened investor enthusiasm, especially for companies that have yet to generate positive free cash flow.