Rivian's (RIVN) stock is trending up again after the EV maker got a big analyst upgrade on Monday. With a “huge market opportunity” ahead of it, Rivian may have what it takes to become a real player in the EV market.
Rivian stock jumps after analyst praise
With a unique product, differentiated technology, and support from Amazon and Volkswagen, Rivian stands out from the EV crowd.
According to Benchmark Securities, Rivan has the potential to capture a significant portion of the “huge market opportunity” in the next few years.
The analyst firm initiated coverage on Rivian stock with a buy rating and a target price of $18 (with The Barrons), suggesting an upside of about 28% from the $14 previous closing price.
After shutting down the Normal, IL plant in April for several months for upgrades, Rivian's production is expected to resume. This will help lower selling prices while improving margins. Benchmark also highlighted Rivian's growing charging network.
In a letter to investors, the company pointed out that “for the new EV crowd, Rivian appears to be in a very good position with contracts from Amazon and Volkswagen.”
The next stage of growth
Rivian also has “adequate cash flow,” Benchmark said, as it improves profitability. Despite the recent DOE loan of 6.6 billion dollars for its plant in Georgia, “RIVN has enough cash to reach the cash flow break-even, according to our estimates,” the note to investors.
The company is already seeing significant reductions in material costs after launching its second R1 models in Q2.
Rivian ended the third quarter with $6.7 billion in cash and equivalents, including a $1 billion convertible from Volkswagen as part of their new joint venture.
Benchmark expects Rivian to “continue to reduce material costs, increase fixed costs, and moderate revenue” with gen-2 vehicles and continue with the R2.
Rivian is expected to launch the smaller R2 in 2026. Starting at $45,000, the electric SUV is poised to attract new buyers as it enters new markets. It will initially be built in Normal, but Rivian will expand production with a new plant in Georgia.
The EV maker expects to build between 47,000 and 49,000 vehicles this year. After the shutdown, Rivian could build up to 150,000 vehicles at its plant in Normal. After the launch of the R2, Rivian expects the production volume to be around 215,000, while the R2 is estimated at only 155,000 units.
Rivian's collaboration with Volkswagen will be a “historic development for the industry,” according to CEO RJ Scaringe. The total deal is worth $5 billion, “a significant financial opportunity,” Scaringe said.
Rivian's shares rose nearly 13% on Monday following the new analyst revelation. Although RIVN shares are up 40% in the past month, they are still up more than 30% in 2024.
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