Following A Downgrade, Rivian Gets A Price Cut

Currently, things are not going well for the shareholders of Rivian Automotive when it comes to their investments. There is a decline in the company's stock as it struggles to control costs and ramp up production as it tries to control costs. Additionally, Wall Street is not helping the situation either.

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According to RBC Capital Markets analyst Tom Narayan, Rivian shares (ticker: RIVN) were downgraded from Buy to Hold by the firm late Tuesday morning. A price target of $28 was halved to $14.

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Shares have fallen as a result of the move. In recent trading, Rivian stock dropped 4.2% to $12.87. Similarly, the Nasdaq CompositeCOMP –0.16% was down 0.3% and the S&P 500SPX –0.18% declined 0.2%.

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According to Narayan, "We believe margins will remain constrained in the near term due to a lack of catalysts to accelerate profitability."

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Investors have been concerned about profitability for some time. Around 24,000 vehicles were produced by Rivian in 2022 at an estimated cost of $8.6 billion. According to Wall Street, 50,000 units will be manufactured in 2023 for about $10 billion.

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The amount Rivian spends on its electric vehicles exceeds that of other start-ups. After all its spending is accounted for against sales, the company is expected to have about $6 billion in cash at the end of 2022.

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There are some positives Narayan sees down the road. It will not be until 2026 before Rivian releases its next-generation vehicle platform, called R2. Nevertheless, it isn't enough to keep him from being rated Hold.

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The number of analysts rating the company as Buy has increased by 58% since his ratings were cut. Stocks in the S&P 500 have an average Buy-rating ratio of 2.20. The Buy-rating ratio for Rivian peaked in late 2021 at about 67%.

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Analysts expect Rivian shares to reach $26 on average. Over the last six months, that's down from about $52.

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In the past 12 months, Rivian stock has dropped 67%. Investors have also lost enthusiasm for high-growth stocks that aren't yet profitable, such as Rivian.

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Most of the news lately hasn't been as positive as Rivian investors would have liked.

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