Rivian Automotive (NASDAQ:RIVN) has seen its bumpy road through much of 2024 turn into a smoother ride in recent weeks, with shares soaring 52% over the past month.
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Several key developments have fueled the stock’s upward momentum. Chief among them is Volkswagen’s decision to boost its investment in Rivian to $5.78 billion. Additionally, the U.S. Department of Energy is considering a $6.6 billion loan to support the construction of a manufacturing plant in Georgia.
But is this enough to warrant investor confidence?
Though acknowledging some very valid reasons for optimism, top investor Daniel Jones is still not ready to take the plunge.
“Rivian’s financials show improved profit margins but significant per-vehicle losses, and future success hinges on scaling production and achieving profitability amidst industry challenges,” asserts the 5-star investor, who sits in the top 2% of TipRanks’ stock pros.
Jones points out that considerable uncertainties still cloud Rivian’s outlook. These include the company’s spending trajectory, cash flow sustainability, and the precise terms of the potential DOE financing deal for the Georgia facility.
“We have absolutely no idea how much in capital spending the company will need as a whole after next year,” Jones notes, adding that important data points such as the timing of production ramp-ups and margin improvements are “purely guesswork.”
Adding to the unease, Rivian’s gross profit per vehicle has slipped further into the red. The gross profit deepened from a negative $30,648 in Q3 2023 to an even bleaker negative $39,130 in Q3 2024.
Moreover, while Jones is optimistic about the prospects of the EV industry as a whole, this may not translate into gains for individual firms such as Rivian.
“This will be a commoditized market with low margins for the most part,” Jones argues. “I think that many of the companies operating out there today are going to struggle significantly.”
With too many details still left to be filled in, Jones rates Rivian shares a Sell, concluding that “the picture for the business as a whole is quite risky.” (To watch Jones’ track record, click here)
Ultimately, Wall Street analysts remain split on Rivian’s outlook. Over the past three months, the stock has garnered 10 Buy, 10 Hold, and 1 Sell recommendations, resulting in a Moderate Buy consensus rating. The average price target of $15.05 suggests the stock is likely to stay rangebound, underscoring the ongoing divide between bullish optimists and cautious skeptics. (See RIVN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
