Rivian (RIVN) stock pops after new analyst sees ‘credible path’ for the EV maker to breakeven


Rivian (RIVN) stock pops after new analyst sees ‘credible path’ for the EV maker to breakeven

After Rivian (RIVN) stock earned a big buy rating on Tuesday, shares traded up nearly 9% as investors look for the EV maker to break even. A new analyst sees at least 50% upside for Rivian’s stock price with a “credible path” to breakeven gross margins.

Rivian has a “credible path” to breakeven: Analyst

On Tuesday, Guggenheim analyst Ronald Jewsikow initiated a buy rating for Rivian stock, setting an $18 price target.

In a note to investors, Jewsikow said, “We see a credible path to breakeven gross margins” in Q4 2024.

The comments mirror those of Rivian’s CEO, RJ Scaringe. After a planned shutdown at its Normal, IL plant in April, Scaringe said the company “introduced a dramatic cost reduction in material costs.”

During a factory visit this week, Rivian told Reuters that upgrades earlier this year resulted in a 35% material cost reduction for its vans. The latest upgrades have savings of a “similar magnitude” for its R1S and R1T models.

Rivian has cut out 100 steps from the battery-making process, 52 pieces of equipment from the body shop, and over 500 parts from the design.

Production at Rivian’s Normal, IL plant (Source: Rivian)

The path to profitability

Rivian’s gross vehicle margins have improved drastically over the years. After losing $139,277 for every vehicle built in Q3 2022, Rivian lost around $39,000 per EV in the first three months of 2024.

Although that number is down from the over $43,000 loss per vehicle in Q4 2023, it’s still up from the $32,600 and $30,500 loss in Q2 and Q3 2023, respectively.

Q3 ’22 Q4 ’22 Q1 ’23 Q2 ’23 Q3 ’23 Q4 ’23 Q1 ’24
Rivian loss per vehicle $139,277 $124,162 $67,329 $32,594 $30,500 $43,372 $38,784
Rivian loss per vehicle by quarter

Rivian is projecting its first positive gross profit in the fourth quarter of this year. Jewsikow sees Rivian’s recent plant upgrades and supplier negotiations as key to reaching positive gross profit.

After 2024, Jewskikow expects Rivian to generate positive EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2026 when Rivian launches its next-gen EVs.

Rivian R2 (Source: Rivian)

Rivian revealed the smaller, more affordable R2 in March, which will start at $45,000. The R2 is expected to greatly expand Rivian’s market after it earned over 68,000 reservations in under 24 hours.

The R2 will be made in Normal, starting in early 2026. Although production was initially planned to begin at its new Georgia facility, the move saves $2.25 billion and will get R2 on the market quicker.

Rivian’s R2 is expected to account for 155,000 of the 215,000 future annual capacity at the plant.

Rivian stock chart over the past 12 months (Source: TradingView)

Rivian stock was up nearly 9% on Tuesday following the news. Rivian’s shares are still down 43% in 2024 and 11% over the past 12 months.

Update: Rivian stock surges after hours following an announcement that Volkswagen will invest up to $5 billion into Rivian to form a joint venture for next-gen EVs

Rivian’s CEO, RJ Scaringe, said on a media call following the news that the investment will help Rivian on its path to profitability. It will also provide support as the EV maker launches its next-gen R2 and R3 models.

Source: Barrons

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