On Thursday, Wells Fargo (NYSE:WFC) updated its outlook on Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ:RIVN) shares, raising the electric vehicle maker's price target to $18 from the previous $10. The firm kept its Equal Weight rating on the stock.
The revision comes as Wells Fargo anticipates a smaller than expected adjusted EBITDA loss for the second quarter, estimating it at -$757 million, which is more favorable than the FactSet consensus of -$859 million. This adjustment is attributed to Rivian's better-than-anticipated delivery results.
The analyst from Wells Fargo acknowledged that while the second-quarter figures look promising, the forecast for fiscal year 2024 remains conservative. The firm's projections are approximately 7% below the consensus and Rivian's own adjusted EBITDA guidance of $2.7 billion.
This caution stems from anticipated lower material cost savings on the second-generation R1 vehicle, estimated at 14% versus the expected 20%, as well as diminished fixed cost leverage due to lower deliveries in the second half of the year and unchanged pricing. Consequently, Wells Fargo expresses reservations about Rivian's ability to reach breakeven gross profit by the fourth quarter.
Wells Fargo's updated stance also factors in recent updates regarding Rivian's vehicle deliveries, increased liquidity, and the potential financial benefits from a joint venture with Volkswagen (ETR:VOWG_p). The firm's price target adjustment reflects a more optimistic view on Rivian's improved liquidity position and cost-saving measures.
Rivian's stock price target uplift by Wells Fargo is based on the company's operational updates and financial strategies, which include better delivery outcomes and actions taken to bolster liquidity.
The analyst's commentary indicates a cautious yet slightly more positive outlook on the electric vehicle company's financial trajectory, especially considering the recent cost-saving initiatives and partnership ventures. Rivian's journey towards achieving its financial targets will continue to be closely monitored by investors and market analysts alike.
In other recent news, Rivian Automotive has been the center of significant developments. Following robust Q2 vehicle deliveries of approximately 13.8k units, Mizuho has raised Rivian's share target from $11.00 to $15.00. The company's Q2 performance also surpassed the consensus expectations of about 11.5k vehicles.
Furthermore, Rivian announced a significant change in its executive team with the resignation of the Chief Accounting Officer, Jeffrey Baker. Claire McDonough, the current CFO, has been appointed as the interim principal accounting officer.
In addition to these developments, Rivian has publicly refuted claims of an expanded production partnership with Volkswagen. The company remains committed to its original production plans for the R2 model.
Amid these developments, CFRA analyst Garrett Nelson reiterated a Sell rating on Rivian, maintaining a cautious stance due to concerns over Rivian's ability to meet its full-year production goals.
These recent developments underscore the evolving landscape for Rivian Automotive. The company's performance, strategic partnerships, and executive changes provide a snapshot of Rivian's current state in the electric vehicle sector.
InvestingPro Insights
Amidst the cautious optimism from Wells Fargo on Rivian Automotive Inc's (NASDAQ:RIVN) financial outlook, InvestingPro real-time data and analytics offer additional insights into the company's performance and market position. Rivian holds a substantial market capitalization of $17.11 billion, despite a negative P/E ratio of -2.41, which reflects the company's current lack of profitability. The revenue growth is a bright spot, with a remarkable increase of 123.79% over the last twelve months as of Q1 2024, indicating a strong demand for Rivian's electric vehicles.
However, Rivian's financial health is a mixed bag according to InvestingPro Tips. While the company has more cash than debt, which is a positive sign for liquidity, it is also quickly burning through its cash reserves. Analysts are adjusting their earnings expectations downwards for the upcoming period, and the company's gross profit margins remain weak. These factors, combined with the assessment that Rivian is not expected to be profitable this year, may concern investors.
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