Barclays reaffirmed their Outperform rating and $22.00 price target on Rivian Automotive (NASDAQ:RIVN) as the electric automaker continues along its path towards a breakeven point.
Analysts, from Barclays visited the Rivian plant in Normal, IL where they met with COO Frank Klein and others.
They wrote in a note following the meeting, “Our clear takeaway is that RIVN has moved past the many challenges/fire fights which deeply challenged operations in 2022. With better stability, RIVN now has the bandwidth to properly address manufacturing process improvements / material cost reduction initiatives – there is much low-hanging fruit, much runway, and clear improvements are being made. And with clear line of sight on RIVN’s initiatives, we see improved confidence on the path to reaching gross margin breakeven in 2024.”
While the supply of components still isn't ideal, things have gotten much better compared to 2022 when RIVN had to deal with shortages of critical components, which caused them to lose 21 days of production. But today, RIVN doesn't have any problems with shortages for those essential parts.
Rivian is also making progress on cost reduction via supplier contract renegotiations. The company provided fact sheets to each of its suppliers showing them where there are price gaps vs. what they should be paying based on material, labor, and overhead. RIVN has split its suppliers into three waves – it has already completed engagements with the first wave and is receiving new contract proposals.
Additionally, RIVN considers its vertical integration as a key competitive advantage. When it comes to their software capabilities, they have successfully achieved swift redesign times for content modifications. This is primarily due to their practice of developing their own software that works in conjunction with different electronic components obtained from tier 1 suppliers, rather than relying heavily on embedded software provided by the suppliers.
Shares of RIVN are up 1.65% in premarket trading on Friday.