On Friday, Barclays adjusted its financial outlook for Rivian Automotive (NASDAQ:RIVN), reducing the electric vehicle manufacturer's price target from $12 to $10 while maintaining an Equal-Weight rating. The reassessment comes as the company navigates through a period of greater capital constraints that are expected to soften its path of volume growth.
Barclays highlighted a strategic shift with Rivian's R2 model start of production at its Normal facility and the postponement of its Georgia plant as key factors influencing the decision. This move is anticipated to relieve some pressure for capital raises but also delays the timing of Rivian's ability to achieve mass scale production. The firm has adjusted its volume expectations downward through the end of the decade, citing softer demand for Rivian's R1 model and commercial vans, as well as a delayed R2 production ramp.
Cost reductions remain a focal point for Rivian as it aims to navigate through an "EV Winter," which has seen its stock decline by 58% year-to-date, significantly underperforming the S&P 500's 6% gain. The downgrade to an Equal-Weight rating occurred in February, following observable weaknesses in demand for Rivian's R1S model. Moreover, a lackluster production guide for 2024, which projected flat year-over-year production, has contributed to negative investor sentiment.
In response to these challenges, Rivian has pivoted its strategy by postponing the construction of its Georgia plant and opting to begin initial production of the R2 model in an expanded facility in Normal. This strategy is expected to bring the R2's start of production forward to the first half of 2026, compared to the previous target of the second half of 2026 in Georgia. This shift is also projected to reduce capital expenditures by $2.25 billion, which includes capital investments, product investments, and supplier costs.
While Barclays acknowledges the merits of Rivian's management strategy, the firm also recognizes the trade-offs involved, particularly the delayed mass scale opportunity resulting from the deferral of the Georgia plant. The bank projects a smaller overall scale for Rivian at least through the end of this decade. Despite these revisions and the lowered price target, Barclays finds Rivian's long-term potential as a vertically integrated pure-play electric vehicle manufacturer compelling, leading to the retention of its Equal-Weight rating.