Rivian has fewer incentives in 2024 than its new SUV, but the long-term story is the same, analysts say.

Rivian has fewer incentives in 2024 than its new SUV, but the long-term story is the same, analysts say.


Rivian Automotive Inc. is looking at a challenging 2024 with few incentives beyond the unveiling of its new mid-size SUV, the R2, in the coming weeks, but the EV maker’s long-term story remains unchanged, analysts said Thursday.

Baird analyst Ben Kallo said he maintains a high rating on RIVN stock,
-3.15%
after disappointing earnings released late Wednesday, showing a bigger-than-expected quarterly loss and guidance that means it will produce fewer cars than in 2023.

The company said it would make 57,000 EVs this year, compared to 57,232 EVs produced in 2023. Wall Street estimates for 2024 production hover around 66,000 vehicles to 68,000 vehicles.

The company plans to reduce operating costs and apply what it learned to its new plant in Georgia, which is expected to start production in 2026.

Production guidance was “difficult” with major changes at its manufacturing facility, Kallo wrote in a letter to customers. The company has been ahead of its manufacturing issues for several quarters and a quarterly decline was expected, he wrote.

Read also: Rivian cannot avoid ‘EV’ winter, Barclays warns in downgrade of its shares

“However, the magnitude of the impact was greater than our/Street estimates, and we believe it will pressure stocks in the near term,” the note said.

The company has several areas of cost reduction, and is investing in a stable long-term setup. “We continue to like the product, brand and management, but we are removing (the stock) as a Top Pick for 2024,” Kallo wrote.

Rivian shares were down 14% in the market, tracking its after-hours move. The company said higher interest rates and economic pressures have informed its outlook for 2024.

“Economic and geopolitical uncertainties and pressures, particularly the impact of historically high interest rates, have informed our outlook for 2024,” company executives said in a letter to shareholders announcing the results.

Rivian said it is cutting about 10% of its salaried workforce to control costs. The company is determined to release the R2 on time and expects to be as successful with the affordable EV as it was with the first one, Chief Executive RJ Scaringe said on a call with analysts.

Analysts at Mizuho also stuck with a buy rating on the stock, but lowered their price target to $24 from $30.

The numbers are further signs that the EV honeymoon is over with headwinds in 2024 including the sunset of subsidies in the US and Germany and weak consumers, wrote analysts led by Vijay Rakesh.

“While we would note that Rivian faces the same headwinds as the rest of the EV market, we find it attractive with a good product portfolio focused on SUVs/Pickups while trading at a significant 70%/40% discount compared to its Tesla/Lucid peers, respectively. ” analysts wrote.

Rivian is expected to grow revenue by 13% in fiscal 2024 and by 69% in fiscal 2025, the letter said. Production is expected to increase, it has about $9.4 billion in cash on hand and is on track to turn a profit in the fourth quarter of 2024, they wrote.

Rivian wasn’t the only EV maker to issue disappointing production guidance on Wednesday. EV set up Lucid Group Inc. LCID,
+0.54%
guided for the 2024 production of only 9,000 cars, after producing 8,428 cars last year.

Lucid shares fell 8.6 percent. Trading volume of shares of Tesla Inc., TSLA.
+0.52%
increased by 0.8%.

Rivian shares have fallen 19% in the past 12 months, while the S&P 500 SPX has gained 24%.