The Q3 earnings season had electric vehicle (EV) makers hitting a series of wrong notes and included indications of waning demand, reduced outlooks and the slashing of targets.
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The resulting cacophony, says Canaccord George Gianarikas, sounded something akin to a “middle school marching band.” However, against all that dissonance, one report was strikingly different.
“Rivian’s (NASDAQ:RIVN) earnings song proved much more melodious: guidance raises and a clear path to profitability,” Gianarikas said. “As the world appears to be inflecting to a worsening state of affairs, we maintain that Rivian is inflecting to rapidly improving margins.”
To reach the sweet tones of positive gross margins, Rivian will be introducing a range of production enhancements in 2024. While these improvements are expected to positively influence long-term margins, they may also alter the pace of quarterly production.
The first quarter that will actually be affected is the present one, during which there will be a minor drop in sequential production, due to a one-week factory shutdown for improvements before a major shutdown in 2Q24.
That’s when the big disruption will place, with Rivian warning production will be significantly impacted in the quarter as the company undergoes a comprehensive overhaul of its manufacturing processes and integrates new technologies into both its consumer and commercial platforms.
Management has also said there should be several new supply agreements that will be advantageous to the cost structure with the agreements strategically scheduled to come into effect after the completion of the factory upgrades. “The combination of new technology, manufacturing changes, and updated supply arrangements should serve to both improve vehicle performance and enhance firm profitability,” opined Gianarikas.
It’s all part of Rivian’s plan to become a major player in the EV space, and the company appears to be making the right moves. Through a “sound, thorough, vertically integrated strategy,” Gianarikas continues to believe Rivian is “on its way to capturing its fair share of the EV market over time.”
By early next year, there’s also the prospect of getting a first look at Rivian’s more affordable SUV, the R2, which should help make the brand more visible to the general American public.
“As other OEMs retreat from EV commitments either by design or compelled by demand issues,” Gianarikas summed up, “Rivian has a unique, timely opportunity to push forward now and pull ahead of the non-Tesla pack.”
Conveying his confidence, Gianarikas maintained a Buy rating on RIVN stock while his $30 price target implies shares will appreciate by a robust 88% over the coming months. (To watch Gianarikas’s track record, click here)
Elsewhere on Wall Street, the stock garners an additional 11 Buys, 7 Holds and 1 Sell, for a Moderate Buy consensus rating. Going by the $26.28 average target, a year from now, shares will be changing hands for ~65% premium. (See RIVN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
