Rivian Automotive (NASDAQ: RIVN) stock saw a modest decline in pre-market trading Thursday following a less optimistic short-term forecast from Cantor Fitzgerald.
Cantor Fitzgerald has adjusted its price target for Rivian (RIVN) shares from the previous $23.00 to a new target of $15.00. The firm, however, has maintained its Overweight rating on the electric vehicle manufacturer’s shares. This downward revision in the price target reflects a more cautious short-term outlook, driven by several factors impacting Rivian’s business.
The firm cited a slower ramp-up in vehicle production than initially anticipated, as one of the primary concerns. In addition, Rivian continues to face challenges such as persistent negative gross margins and a substantial cash burn rate, estimated at around $4 billion/year.
Rivian’s Revised 2024 Production and Margin Estimates
The analysts have also observed a near-term slowdown in the demand for electric vehicles, prompting them to adjust their expectations accordingly. The revised financial forecasts for Rivian include a reduction in 2024 production estimates to 58,000 units, down from the previous forecast of 61,000. Similarly, the firm has lowered the gross margin estimates for fiscal year 2024 to negative 23%, compared to the earlier projection of negative 21%. These adjustments are based on Rivian’s expectations, which suggest the company may only achieve a modest positive gross profit in the fourth quarter of 2024.
Looking ahead to fiscal year 2025, Cantor Fitzgerald has also downgraded the gross margin forecast to around 1%, a significant decrease from the initial projection of 6.3%. This adjustment anticipates seasonal variations, with expectations of negative margins in the first half of 2025 transitioning to positive margins in the latter half of the year. Correspondingly, the analysts have adjusted the revenue forecast for the fiscal year 2025 to about $7,404.5 million, slightly lower than the previous estimate of $7,495.9 million.
Cantor Fitzgerald derived the fresh price target of $15.00 from a bottom-up, 10-year discounted cash flow (DCF) analysis. This valuation assumes an 11% weighted average cost of capital (WACC) and incorporates a terminal value with a 2% long-term growth rate.
Rivian (NASDAQ: RIVN) Stock Movement
As of 08:24 a.m.. (Eastern Time) Thursday, RIVN stock traded at $10.15, marking a 1.17% decrease compared to the previous trading session.
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