By Michael Elkins
Bank of America Securities resumed coverage of Rivian (NASDAQ:RIVN), with a Buy rating and lowered the price target on the stock to $40.00 (From $50.00), after the electric vehicle maker announced a proactive capital raise.
Rivian announced a capital raise on March 6 with the sale of $1.3 billion in 4.625% Green Convertible Senior Notes due in 2029. The raise was largely expected as cash burn remained elevated in 2022, but comes sooner than Bank of America’s forecasts, which embedded capital raises of $5B each in 2024 and 2025.
Analysts wrote in a note, “RIVN’s decision to raise additional liquidity stems from the slower than expected production ramp, which could push its breakeven point further out. Supply chain challenges, especially on semiconductors, derailed initial production plans and remain cute in 2023 although slightly more manageable. We believe the company opted for an earlier round of financing to ensure that financial resources are sufficient to bridge the company to profitability and avoid larger last minute financing rounds, which may prompt nervousness across the investor base.”
Bank of America revised their 2023 EPS estimates from ($4.58) to ($5.75), 2024 EPS from ($3.65) to ($2.05) and 2025 from ($2.25) to ($0.40).