On Wednesday, Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ:RIVN) saw its price target reduced by Cantor Fitzgerald from the previous $23.00 to a new target of $15.00. The firm has maintained its Overweight rating on the electric vehicle manufacturer's shares. The adjustment reflects a more cautious short-term outlook due to several factors impacting Rivian's business.
The revised price target comes amid concerns about a slower ramp-up in vehicle production than initially expected. There is also an observed near-term slowdown in the demand for electric vehicles, which has prompted the analyst to adjust expectations. Additionally, Rivian is grappling with persistent negative gross margins and a significant cash burn rate, estimated at around $4 billion per year.
Rivian's financial forecasts have also been revised, with production estimates for 2024 reduced to 58,000 vehicles, down from the previous forecast of 61,000. The firm's gross margin estimate for the fiscal year 2024 has been lowered to negative 23%, a decrease from the earlier projection of negative 21%. This is based on the company's own expectations of only achieving a modest positive gross profit in the fourth quarter of 2024.
Looking further ahead, the analyst has also decreased the fiscal year 2025 gross margin forecast to approximately 1% from the initial 6.3%. This takes into account seasonal variations and anticipates negative margins in the first half of 2025, with a shift to positive margins in the latter half of the year. Correspondingly, the revenue forecast for fiscal year 2025 has been adjusted to approximately $7.404.5 million, a slight decrease from the previous estimate of $7.495.9 million.
The new price target of $15.00 is derived from a bottom-up, 10-year discounted cash flow (DCF) analysis. In this valuation, an 11% weighted average cost of capital (WACC) is assumed, along with a terminal value that incorporates a 2% long-term growth rate.
InvestingPro Insights
In light of Cantor Fitzgerald's revised price target and outlook for Rivian Automotive Inc, real-time data from InvestingPro offers additional context for investors considering the electric vehicle manufacturer's stock. Rivian's Market Cap stands at $10.2 billion, suggesting a significant presence in the industry despite its challenges. The company's Revenue Growth over the last twelve months as of Q1 2023 is an impressive 167.43%, indicating a strong increase in sales, which could be a positive signal for potential long-term growth.
However, the financial health of Rivian raises concerns as indicated by InvestingPro Tips, which highlight the company's rapid cash burn and weak gross profit margins. Specifically, Rivian is not only quickly burning through cash but also suffers from weak gross profit margins, with a Gross Profit Margin of -45.78% over the last twelve months as of Q1 2023. This aligns with Cantor Fitzgerald's concerns about negative gross margins and a significant cash burn rate. It's also important to note that analysts do not anticipate Rivian to be profitable this year, which is reflected in the negative P/E Ratio of -1.78.
For investors looking for more guidance, there are additional InvestingPro Tips available that delve into Rivian's financial health, stock price movements, and valuation metrics. To gain access to these insights, and to help make more informed investment decisions, consider subscribing to InvestingPro with the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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