Barclays adjusted its financial outlook on Friday Rivian automotive sector (NASDAQ:), lowering the electric vehicle maker’s price target from $12 to $10 while maintaining an Equal-Weight rating. The reassessment comes as the company navigates a period of increased capital constraints that are expected to soften its volume growth trajectory.
Barclays highlighted a strategic shift with the start of production of Rivian’s R2 model at the Normal plant and the postponement of the Georgia plant as the main factors influencing the decision. The move is expected to ease pressure for capital increases, but also delay the timing of Rivian’s ability to achieve mass production. The company has lowered its volume expectations through the end of the decade, citing weaker demand for Rivian’s R1 model and commercial vehicles, as well as delayed R2 production.
Cost savings remain a focus for Rivian as the company looks to navigate an “EV Winter” that has seen its shares fall 58% this year, significantly underperforming the S&P 500’s 6% gain. The cut to a Equal-Weight rating occurred in February, due to observable weaknesses in demand for Rivian’s R1S model. In addition, a lackluster production forecast for 2024, which predicted flat year-over-year production, contributed to negative investor sentiment.
In response to these challenges, Rivian has changed its strategy, postponing construction of its Georgia factory and opting to start initial production of the R2 model at an expanded factory in Normal. This strategy is expected to bring forward the start of production of the R2 to the first half of 2026, compared to the previous target of the second half of 2026 in Georgia. This shift is also expected to reduce capital expenditures by $2.25 billion, including capital investments, product investments and supplier costs.
While Barclays recognizes the merits of Rivian’s management strategy, the company also recognizes the tradeoffs involved, particularly the delayed large-scale opportunities resulting from the postponement of the Georgia plant. The bank expects a smaller overall size for Rivian at least until the end of this decade. Despite these revisions and the reduced price target, Barclays finds Rivian’s long-term potential as a vertically integrated pure electric vehicle manufacturer compelling, which has led to the retention of its Equal-Weight rating.
