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

On Monday, Rivian Automotive (RIVN) saw its shares downgraded to Equal-Weight from Overweight by Barclays. The stock price target was also lowered to $16 per share.

The analysts based their downgrade on three factors. Firstly, they noted that while the company has a great product, its technology is not enough to avoid increased signs of demand pressure amid a broader EV slowdown. Secondly, they believed that demand softness implies risk from pricing and slower volume growth. Lastly, the analysts pointed out that recent data points from the sales of R1S inventory units and the accelerated launch of a Standard range version suggest softened demand.

Despite hopes that demand would remain resilient for R1S, signs of weakness in EDV and R1T emerged last year. However, recent data points indicate that demand is still weakening. As a result, Barclays sees an ongoing need for capital raises at Rivian, with weak demand being significant consequences. Not only does it mean the volume outlook is challenged, but it also presents a potential pricing risk. These two points reinforce that RIVN is likely to miss its 2024 target of reaching gross margin profitability. Furthermore, with ongoing capital needs given preparation for the high volume R2 in 2026, Barclays foresees future pressure on the company’s growth prospects.

In conclusion, while Rivian Automotive has developed a great product lineup, its technology may not be enough to overcome increased signs of demand pressure amidst a broader EV slowdown. The bank believes that this could lead to risks related to pricing and slower volume growth. With ongoing capital needs and challenges ahead in terms of meeting profitability targets and preparing for future growth opportunities such as the high volume R2 in 2026, investors should keep an eye on this stock closely before making any investment decisions.

By Editor

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