Rivian Stock (NASDAQ:RIVN)
According to one research group, now is the moment to sell your shares in Rivian Automotive (NASDAQ:RIVN +0.90%) as the start-up company for electric trucks faces an increasing number of obstacles.
On Monday, analysts Ben Rose and Jonathan Rowe from Battle Road Research downgraded Rivian stock (NASDAQ:RIVN) from Hold to Sell, citing “internal challenges and sector-wide struggles.”
The problems that affect the whole sector are widely acknowledged. The price reductions that Tesla (NASDAQ:TSLA) is implementing are exerting pressure on other manufacturers of electric vehicles to follow suit. This might have a negative impact on profit margins and cash flow for businesses within the EV industry.
At the end of 2022, Rivian had over $12 billion in cash on its books, and it is anticipated that it will use almost half of that amount in 2023. Rivian is under pressure to make cost cuts in order to maintain capital as a result of pricing movements made by Tesla, as well as a declining economy. These factors could accelerate the cash-burn rate. In February, the firm announced that it will be eliminating 6% of its existing personnel.
Battle Road is also unhappy about the fact that Rivian missed its production targets for the year 2022, has recalled some of its vehicles on multiple occasions, and won’t get a benefit in the short future from the tax credits that were passed as part of the Inflation Reduction Act. At this time, Rivian automobiles do not meet the requirements.
According to the research that downgraded Rivian’s stock, the analysts stated that “all of these factors dampen Rivian’s chances of success in the near term.” A request for comment was sent to Rivian, but they did not react right away.
The downgrading did not come with any recommendations regarding the stock’s price. In this particular situation, a Sell call from Battle Road indicates that the firm anticipates Rivian stock will underperform the market.
After reaching a 52-week low on Friday, Rivian shares were up 1.4% in early trading on Monday, when they were trading at $12.42. On Monday, both the S&P 500 SPX –0.14% and the Nasdaq Composite COMP –0.63% saw gains of approximately 0.1%.
The ratio of a stock’s rating to buy remains unchanged even if it is downgraded from hold to sell. Rivian shares have been assigned a Buy rating by approximately 58% of analysts covering the company, which is comparable to the average Buy-rating ratio for stocks included in the S&P 500 index.
When a new Sell rating is given, the ratio of Sell ratings will, of course, alter. Rivian stock is now rated a Sell by almost 13% of analysts covering the company, although the average rating for firms in the S&P 500 is less than 10%.
Compared to approximately $73 a share a year ago, the current average price objective among analysts is approximately $26. Over the past year, Rivian stock has had a decline of almost 63%. Investors have been less enthused about the company as a result of increasing interest rates, production gains that have been less than planned, and expensive costs.
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