Al Root
Shares of electric-vehicle start-up Rivian Automotive fell early Wednesday after catching a downgrade.
Baird analyst Ben Kallo, on Wednesday, cut his rating to Hold from Buy, and lowered his price target to $14 from $16.
Rivian stock was down 1.6% at $14.47 in premarket trading, while S&P 500 and Dow Jones Industrial Average futures were up 0.2% and 0.3%, respectively.
"With the Volkswagen joint venture having recently closed and [the] Department of Energy funding announcement (a positive surprise) in the rearview, we see few catalysts in 2025 and expect shares to languish with EV sales," wrote Kallo.
In November, Rivian announced a $6.6 billion loan that will help the company build an assembly plant in Georgia. Capital is always important for start-ups -- especially car start-ups. It takes billions to build the scale needed to make cars profitably.
Rivian isn't profitable yet and has used about $20 billion to build its business. Wall Street projects about $3 billion in 2025 and 2026, combined, according to FactSet. Positive free cash flow is forecast by 2029. Sales are expected to be about $30 billion by then, up from an expected $5.1 billion in 2025.
Volkswagen is also providing capital. Earlier in 2024, Volkswagen and Rivian announced a partnership that would see the German auto maker invest billions of dollars into the EV start-up in the coming years.
As for EV sales, the U.S. election is a reason Kallo cited for decelerating sales growth in 2025. President-elect Donald Trump is expected to roll back some of the Biden-era EV incentives, including Federal purchase tax credits worth up to $7,500. Cutting the incentive makes buying an EVs more expensive, which is never good for sales.
Currently, most Rivian models qualify for a $3,750 purchase tax credit. (Various production and sourcing requirements determine the level of support.) All leased vehicles qualify for the full $7,500 credit.
Overall, 43% of analysts covering Rivian stock have Buy ratings, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Rivian stock is about $15.
Analyst sentiment has been sliding. A year ago, about 70% of analysts covering Rivian stock had Buy ratings, and the average target price was about $26.
Coming into Wednesday trading, Rivian stock was down about 37% year to date. Slowing sales growth has weighed on investor sentiment. Rivian is expected to deliver about 51,000 vehicles in 2024, up from about 50,000 in 2023. At the start of the year, Rivian was expected to deliver closer to 70,000 vehicles.
Write to Al Root at allen.root@dowjones.com
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(END) Dow Jones Newswires
December 18, 2024 08:04 ET (13:04 GMT)
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