DA Davidson downgrades Rivian on aggressive R2 expectations

Investing.com -- DA Davidson analysts downgraded electric-vehicle maker Rivian to underperform in a note on Tuesday, warning that the company’s upbeat tone on its forthcoming R2 model masks execution risks.

Analyst Michael Shlisky cut the firm’s rating from neutral and lowered its price target to $14 from $15, citing concerns that Rivian must deliver “the best mid-size EV launch since 2021 — without the benefit of tax credits or a mass-channel dealer network.”

Shlisky believes the R2 launch expectations of 20,000 to 25,000 units in 2026 are aggressive, noting that only the Mustang Mach-E has come close to that level in its debut year, and it had “the since-ended $7,500 Federal EV credit” and broad dealer support.

The note followed Rivian’s fourth-quarter results, where adjusted EBITDA of -$465 million beat expectations but revenues of $1.29 billion fell short of the firm’s own estimate.

The company guided for 62,000 to 67,000 vehicle deliveries this year and adjusted EBITDA losses between -$2.1 billion and -$1.8 billion.

DA Davidson said it is not questioning the quality of the upcoming model. “Early reviewers appear to love the vehicle,” the analysts wrote, adding that they expect the R2 to integrate autonomy upgrades and follow the strong performance of the R1, whose “acceleration, high-quality interior, and nifty features” impressed the firm.

Still, DA Davidson warned that “a lot has to go right” given a hesitant consumer base, reduced incentives and low oil prices. “We are downgrading to UNDERPERFORM as a result,” the firm said.

“RIVN finally provided its thoughts on the ramp-up of R2 deliveries--if met, the numbers will be impressive, but we see significant risks ahead,” stated Shlisky. “Among them: a hesitant mass-channel consumer; RIVN's limited number of sales locations; reduced government incentives; and even low oil prices.

“If the R1 is any guide, the R2 will be a very compelling product--however, a lot has to go right for the near-term outlook to be met and we are concerned about headline risk,” the analyst concluded.

You May Also Be Interested In

• Lockheed Martin wins $216 million in new defense contracts
• The Canadian Chrome Company Announces Update on the Process for Sale of the Company or Its Assets and Results of Annual and Special Shareholders' Meeting
• Polaris Modifies Quorum Requirement for Upcoming AGM