Analysts have a lot to say about electric vehicle (EV) manufacturer Rivian Automotive (NASDAQ:RIVN). Some of what they’re saying is positive, but there are some cautionary notes as well. By and large, however, the experts on Wall Street generally expect RIVN stock to move higher. So, consider taking a share position in Rivian for the long term.
Like other EV makers, Rivian Automotive had a tough time in 2022. The company set out to produce 25,000 vehicles last year and came fairly close when it actually produced 24,337 vehicles.
Meanwhile, RIVN stock has tumbled from $50 to less than $15 over the past year. So now, analysts have the unenviable task of trying to predict an uncertain future for Rivian and its stakeholders. With that in mind, let’s see what they have to say and then decide whether it makes sense to invest in Rivian Automotive now.
EV Production Guidance Is a Concern for RIVN Stock Analysts
Rivian Automotive expects to produce 50,000 EVs this year. Analysts on Wall Street, however, hoped Rivian would guide for 60,000 to 65,000 vehicles.
Canaccord analyst George Gianarikas wasn’t particularly impressed with the 50,000-unit guidance figure. He feels that Rivian’s investors want to see “faster production, a quicker ramp to profitability, and more cash cushion on the balance sheet.”
Meanwhile, analysts with Bank of America opined that Rivian Automotive’s fourth-quarter 2022 results were “just ok” and that the automaker’s 2023 production volume guidance of 50,000 was lighter than expected. Nevertheless, both Gianarikas and the Bank of America analysts maintained “buy” ratings on Rivian shares.
Morgan Stanley Analyst Cites Rivian Automotive’s Cash Burn
Gianarikas reduced his price target on RIVN stock from $55 to $40, while the Bank of America analysts lowered their target price from $50 to $40. However, $40 is still much higher than the current Rivian Automotive share price.
Morgan Stanley analyst Adam Jonas also issued a “buy” rating on Rivian shares, but his price target of $26 is less optimistic than the aforementioned price objectives. Jonas is concerned that “inefficiencies at Rivian are weighing on profit margins,” according to a Barron’s report.
Presumably, Jonas is referring to Rivian Automotive’s capital spending, including the company’s operating expenses, when he mentions Rivian’s “inefficiencies.” Alarmingly, Rivian spent around $3.7 billion on operating expenses last year.
Furthermore, Rivian Automotive burned through roughly $6.4 billion in cash in 2022. Plus, the company is anticipated to use up another $6 billion in cash this year. This is a problem, as Rivian ended 2022’s fourth quarter with a cash position of only $12.1 billion.
So, Is RIVN Stock a Buy?
Going forward, investors should monitor Rivian Automotive’s cash burn rate and EV production pace. Hopefully, the former will slow down while the latter will pick up.
Like the aforementioned analysts, I acknowledge Rivian’s problems but am still optimistic overall. Wall Street generally expects RIVN stock to reach approximately $28, and there are many more “buy” ratings than “sell” ratings. Therefore, it makes sense for risk-tolerant EV market investors to take a small long-term share position in Rivian Automotive.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.