Rivian stock charges higher as Stifel says it’s a ‘Buy’

Rivien (RIVN) stock is up today with a new bull joining the herd.

Stifel initiated coverage of the electric adventure vehicle maker with a Buy rating and a $23 price target. The investment bank sees better pricing, strong demand for its vehicles and margin expansion over the coming year as positive catalysts.

Stephen Gengaro, an analyst at Stifel, wrote that bullish factors include “high-quality” R1 vehicles contributing to brand awareness; Amazon’s pre-order of 100,000 EDVs and the opening of the purchase of EDVs from other commercial fleets; the new upcoming R2 platform which could strongly compete with Tesla’s Model Y; and margin expansion, including new technologies such as Rivian’s in-house Enduro motors and new battery, as well as better pricing and supplier agreements, among other factors.

That being said, Gengaro notes headwinds such as the current macroeconomic environment, high rates and liquidity burn. Still, Gengaro and the Stifel team are optimistic about electric vehicles in general.

“Electric vehicle sales have recently faced significant challenges, driven by both macroeconomic factors (high interest rates, inflation and recession fears) as well as challenges specific to electric vehicles, including the range anxiety, vehicle costs, model availability and charging infrastructure. We believe these barriers to electric vehicles will diminish over the coming years, paving the way for sales growth,” Gengaro wrote in his note.

Stifel’s note follows positive news from Rivian in recent months. The automaker reported third quarter results which beat expectations last month and raised its full-year production forecast to 54,000 from 52,000 units. Its previous forecast of 52,000 units was raised earlier in the year, against 50,000.

Rivian also narrowed its full-year adjusted EBITDA loss to $4.0 billion from $4.2 billion and revealed that its 2023 capex (capital expenditure) guidance had been reduced to $1.1 billion.

This has propelled the stock up 23% over the past month, and Rivian’s stock is now up 2.4% for the year.

The story continues

However, Rivian’s path to profitability is by no means assured. Rivian’s valuation balances the company’s “recently strong execution against an ambitious two-plus year execution plan,” Piper Sandler analyst Alexander Potter wrote in a note following the results, adding that there is “a non-zero risk of delays and cost overruns”.

The short-term problem for Rivian is that the company lost $942 million on an adjusted basis last quarter. With the company delivering about 16,300 vehicles, that means Rivian lost more than $60,000 on each car sold.

With the company always forecast a positive gross margin by 2024CEO RJ Scaringe and his team still have work to do.

Pras Subramanian is a journalist for Yahoo Finance. You can follow it Twitter and on Instagram.

Click here for the latest stock news and in-depth analysis, including the events that move stocks.

Read the latest financial and business news from Yahoo Finance