On Tuesday, Cantor Fitzgerald reaffirmed its Overweight rating on Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ:RIVN), maintaining a price target of $23.00. The firm anticipates Rivian's first-quarter earnings report, scheduled for May 7, 2024, after market close, followed by an earnings call at 5:00 PM ET. The automotive company recently made headlines with the unveiling of its new R2 line, a mid-size SUV starting at $45,000, on March 7, 2024.
Rivian's R2 model boasts advanced features including 11 cameras, five radars, a high-density battery with approximately 300 miles of range, and rapid acceleration and charging capabilities. The starting price is expected to be effectively reduced to around $37,500 for customers after the $7,500 EV tax credit. The R2 will offer single, dual, and tri-motor configurations, with reservations currently open and initial deliveries targeted for the first half of 2026.
In a strategic move, Rivian has decided to pause the construction of its new Georgia manufacturing plant, which was initially set to produce the R2 line. The company expects this pause to yield savings greater than $2.25 billion, stemming from reduced capital expenditures, product development investments, and supplier sourcing costs. Production of the R2 will be relocated to Rivian's Illinois facility, which is projected to have an annual production capacity of 215,000 vehicles across all models after the R2 launch.
Rivian has provided financial guidance for fiscal year 2024, forecasting an adjusted EBITDA loss of $2.7 billion and capital expenditures of $1.75 billion. The company aims to achieve a positive gross profit by the fourth quarter of 2024. In the fourth quarter of 2023, Rivian reported significant improvements in gross profit per vehicle and gross margins compared to the same period in the previous year.
As of the end of the fourth quarter in 2023, Rivian reported approximately $9.4 billion in cash, cash equivalents, and short-term investments, an increase from the third quarter of 2023. Total liquidity, including an asset-based revolving credit facility, was about $10.5 billion. The company used $1.1 billion in net cash for operating activities in the fourth quarter and $4.9 billion for the full year of 2023. Management has confirmed that they expect the current liquidity to be sufficient to fund operations through 2025.
The $23 price target is based on a detailed 10-year discounted cash flow analysis, assuming an 11% weighted average cost of capital and a 2% long-term growth rate in the terminal value. Key risks identified include potential supply chain disruptions, manufacturing constraints, high production costs, a competitive market, and the possibility of slower customer adoption rates.
InvestingPro Insights
With Rivian Automotive Inc (NASDAQ:RIVN) gearing up for its first-quarter earnings report, InvestingPro data and tips provide a nuanced view of the company's financial health and market position. Rivian holds a market cap of $10.84 billion, signaling a significant presence in the automotive industry. Despite a remarkable revenue growth of 167.43% over the last twelve months as of Q1 2023, the company has faced challenges, reflected in a gross profit margin of -45.78% for the same period. This stark figure highlights the cost pressures Rivian is experiencing as it scales up production and brings new models like the R2 line to market.
InvestingPro Tips suggest that while Rivian has more cash than debt on its balance sheet, it is quickly burning through cash, which is a critical consideration for investors. Additionally, analysts have revised their earnings downwards for the upcoming period, indicating concerns about the company's near-term profitability. Nevertheless, Rivian's stock price movements have been quite volatile, which may present opportunities for investors with a high-risk tolerance. For those considering adding RIVN to their portfolio, it's worth noting that there are over 14 additional InvestingPro Tips available, which can be accessed for further insights. Using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to make the most of these valuable insights.
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