Morgan Stanley downgrades Rivian on limited compute progress

Morgan Stanley analyst Adam Jonas downgraded Rivian Automotive to Equal Weight from Overweight with a price target of $13, down from $16. The firm also downgraded its U.S. auto industry view to In-Line from Attractive. The downgrade is driven by a combination of international, domestic and strategic factors that may not be fully appreciated by investors, the analyst tells investors in a research note. The firm says U.S. auto inventories are on an upward slope with vehicle affordability still out of reach for many households. In addition, credit losses and delinquencies continue to trend upward for less-than-prime consumers, adds Morgan Stanley. Further, China’s two-decade-long growth engine has reversed in terms of China profits flipping to losses and China producing nearly 9M units more than it sells locally, adds the firm. It believes Rivian’s ability to drive competitive compute progress in a financially prudent way is limited. Morgan’s projections for Rivian’s 2024 total capex and research and development of $1.3B and $1.7B, respectively, differ from Tesla’s artificial intelligence spend “by almost an order of magnitude.” It questions whether investors are ready to support a new computing capex cycle.