Goldman Sachs Urges Caution with Rivian Stock

The year 2024 has been a challenging one for the electric vehicle (EV) industry, with stocks taking a hit across the board. Rivian, listed on the NASDAQ under the ticker symbol RIVN, has also felt the impact of this downturn, with its shares down by 43% year-to-date. Despite this, Rivian has been making significant progress in various areas, signaling a promising future for the company.

One of the key advancements Rivian has made is in its second-generation R1 platform. The company has been introducing new components and achieving substantial cost reductions in materials and manufacturability. For example, Rivian has managed to reduce the number of in-house ECUs from 17 to 7, and the new quad motor in the second-generation R1 is around 24% cheaper than its predecessor. These improvements are expected to be integrated into the upcoming R2 model, further enhancing the company’s competitiveness in the market.

Furthermore, Rivian’s proposed joint venture with Volkswagen (VW) could be a game-changer for the company. By leveraging its new electrical/electronic architecture, Rivian aims to strengthen its balance sheet and secure the liquidity needed to navigate the Georgia ramp and move towards positive free cash flow. The company also anticipates achieving a modest gross profit in Q4, driven by continued material cost reductions and improved fixed cost leverage.

Despite these positive developments, not everyone is convinced about Rivian’s prospects. Goldman Sachs analyst Mark Delaney, who is highly regarded on Wall Street, maintains a Neutral rating on the stock. Delaney believes that the demand for EVs remains muted, and there could be downside risk to EBITDA if Rivian needs to offer more incentives or pricing actions before the launch of the R2 model in the first half of 2026.

Delaney’s cautious stance is reflected in his price target of $13 for RIVN shares. However, other analysts on the Street have a more optimistic view, with 12 Buy recommendations, 7 Holds, and 2 Sells, resulting in a Moderate Buy consensus rating for Rivian stock. The average price target of $18 suggests a potential upside of around 34% from current levels.

In conclusion, while Rivian has faced challenges in 2024, the company’s progress in advancing its technology and reducing costs bodes well for its future. Investors should carefully consider all available information and conduct their own analysis before making any investment decisions.