What Happened?
Shares of electric vehicle manufacturer Rivian (NASDAQ:RIVN) fell 7.3% in the afternoon session after Bank of America analysts downgraded the stock's rating from Hold to Sell and cut the target price from $13 to $10. The new price target implied a potential 17% downside from where shares traded before the downgrade was announced. The analysts added "We downgrade RIVN from Neutral to Underperform. RIVN remains one of the most viable among the startup EV OEMs [original equipment manufacturers] and is making progress towards sustainably positive gross margins.".
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What The Market Is Telling Us
Rivian’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 4.8% on the news that Cantor Fitzgerald analysts downgraded the stock's rating from Buy to Neutral following its Q4 2024 earnings. The analysts highlighted key concerns, including "lower vehicle deliveries, fewer EDV [electric delivery van] deliveries, and worsening macro conditions, including the implementation of incremental tariffs and the likely removal of the $7,500 EV Tax Credit."
The quarter itself was mixed. Its full-year EBITDA guidance missed, and its deliveries (46,000-51,000 vehicles) forecast for 2025 fell short of analysts' estimates.
On the other hand, Rivian exceeded analysts' revenue, EPS, and EBITDA expectations. Importantly, its gross margin and free cash flow finally reached positive territory, marking a potential inflection point. Rivian had struggled with negative gross margins for quite some time before this print - the main reason it had to cut a ~$5.8 billion deal with Volkswagen in November 2024. In terms of downsides, Zooming out, we think this was a mixed, with the weak outlook weighing on shares.
Rivian is down 9.6% since the beginning of the year, and at $11.98 per share, it is trading 33.9% below its 52-week high of $18.11 from July 2024. Investors who bought $1,000 worth of Rivian’s shares at the IPO in November 2021 would now be looking at an investment worth $118.88.
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