Rivian Automotive’s Shares Downgraded: Demand Slowdown and Capital Concerns Hinder Gross Margin Profitability

Barclays cuts Rivian Automotive citing technology shortcomings in facing the EV market downturn

On Monday, Rivian Automotive (RIVN) had its shares downgraded to Equal-Weight from Overweight by Barclays. The stock price target was also lowered to $16 per share from $25. Analysts made this decision based on three factors. Firstly, they noted that while Rivian has a great product, its technology is not enough to avoid increased signs of demand pressure amid a broader EV slowdown. Secondly, the bank believes that demand softness implies risk from pricing and slower volume growth.

Additionally, the analysts pointed out that signs of demand weakness in EDV and R1T emerged last year, but they hoped that demand would remain resilient for R1S. However, recent data points from the sales of R1S inventory units and the accelerated launch of a Standard range version suggest softened demand.

Barclays also sees an ongoing need for capital raises at Rivian, with the consequences of weak demand being significant. Not only does it mean the volume outlook is challenged, but it also presents a potential pricing risk, with both points reinforcing RIVN is likely to miss its 2024 target of reaching gross margin profitability. Moreover, with ongoing capital needs given preparation for the high volume R2 in 2026, Barclays concluded that there will be future pressure on the company’s operations and financial performance.

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