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Equities

Rivian's Strategic Shifts and Market Response: Analysts Remain Cautiously Optimistic

Rivian's stock climbs after an analyst upgrade, citing a $2.3 billion savings from strategic production shifts and a new $21 price target.

By Alex P. Chase

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3/15, 08:10 EDT
Rivian Automotive, Inc.

Key Takeaway

  • Piper Sandler upgrades Rivian (RIVN) to Buy, raising the price target from $15 to $21, following R2 platform reveal.
  • Rivian's strategic decision to produce R2 in Illinois could save the company an estimated $2.3 billion.
  • Despite a 56% drop over six months, 59% of analysts remain optimistic, with an average price target of $17.60 for RIVN shares.

Rivian's Strategic Shifts and Market Response

Rivian Automotive (RIVN) has recently been in the spotlight following Piper Sandler analyst Alexander Potter's upgrade of Rivian shares to the equivalent of Buy from Hold, with a new price target set at $21 a share, up from $15. This adjustment comes in the wake of Rivian unveiling its second vehicle platform, R2, on March 7, introducing a new SUV due in 2026 alongside a sportier R3 model. Rivian's decision to initiate R2 production in its Normal, Illinois plant, as opposed to Georgia, is anticipated to save the company an estimated $2.3 billion, a significant figure given its current liquidity of about $10 billion and annual business development costs ranging from $4 billion to $5 billion.

Despite these developments, Rivian's stock has experienced volatility, with shares initially rising post-announcement but subsequently dropping. Over the past six months, shares have decreased by approximately 56%, influenced by slowing demand growth for electric vehicles (EVs) and Rivian's disappointing 2024 production guidance. Potter acknowledges the risks associated with investing in Rivian, particularly highlighting concerns around a potential midyear re-tooling effort.

Analyst Perspectives and Market Sentiment

The broader analyst community appears cautiously optimistic about Rivian's prospects. Currently, 59% of analysts covering Rivian stock rate the shares as Buy, slightly above the S&P 500's average Buy-rating ratio of about 55%. The average analyst price target for Rivian stock stands at approximately $17.60, reflecting a blend of optimism and realism regarding the company's future performance.

Rivian's Upcoming Earnings and Broader Market Context

Rivian's forthcoming earnings report is highly anticipated, with investors keen to gauge the company's financial health and strategic direction. The focus extends beyond the immediate financial results, encompassing Rivian's ability to manage cash effectively, expand its product lineup, and navigate the challenges of being a relatively new entrant in the competitive EV market. Rivian's stock was up 4% in premarket trading at $11.12 a share, indicating a modest increase from levels just before the R2 reveal.

Street Views

  • Alexander Potter, Piper Sandler (Bullish on Rivian):

    "Make no mistake: buying Rivan is risky and a botched midyear re-tooling effort could yet surprise investors negatively."