On Friday, BofA Securities revised its stance on Rivian Automotive Inc (NASDAQ:RIVN) shares, shifting from a "Buy" to a "Neutral" rating and adjusting the price target to $13.00, down from the previous $20.00. The change in rating comes as the analyst recognized the company's progress towards achieving a positive gross margin in the fourth quarter of 2024, noting Rivian's position as one of the more promising startups in the electric vehicle (EV) sector.
The report highlighted that while reaching a gross margin positive status is significant, it is expected to be bolstered by regulatory credits, which are currently uncertain under the Trump Administration. The firm also revised its expectations for Rivian's delivery growth in 2025 to a moderate level, citing a tougher demand environment and anticipated production limitations due to scheduled downtime in the second half of 2025.
Increased competition in the EV market is another factor influencing the downgrade. With the anticipated entry of the Lucid (NASDAQ:LCID) Gravity SUV into the market this quarter, Rivian faces additional pressure. Moreover, the recent U.S. elections could potentially alter the regulatory landscape, making it more difficult for consumers to obtain Inflation Reduction Act (IRA) credits and disrupting regulatory credit pricing, which could further challenge Rivian's profitability.
BofA Securities has also updated its valuation approach for Rivian, now valuing the company at 2 times EV/Sales, reduced from the previous 3 times, and extended the valuation horizon to 2026. This adjustment reflects the near-term growth challenges and risks mentioned, influencing the lowered price target.
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