Can Rivian Survive Downgrade?

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24/7 Wall St. Insights

• Morgan Stanley downgraded Rivian Automotive Inc. ( NASDAQ: RIVN ) stock and slashed its price target.
• Rivan faces challenges that other EV makers do not.
• Also: 2 Dividend Legends to Hold Forever .

Investment bank stock research departments recently downgraded Ford Motor Co. ( NYSE: F ), General Motors Co. ( NYSE: GM ), and Rivian Automotive Inc. ( NASDAQ: RIVN ) stocks. Ford and GM received downgrades due to Chinese competition and other global manufacturers' challenging sales. Rivan was downgraded because of worries it could not afford to improve its compute process. The compute process helps integrate the operation of all software on a vehicle and its links to outside signals.

Morgan Stanley downgraded Rivian from Overweight to Equal Weight and cut its price target from $16 to $13. Another reason for the downgrade is that electric vehicle (EV) sales are slow and Rivian loses money. The price target change was particularly insulting because Rivian trades at $11.50. This year, the share price is down 52%, while the S&P 500 is 20% higher.

Rivian only produced 9,612 vehicles in the second quarter, and it delivered 13,970. Revenue was only a tiny $1.12 billion in the second quarter, down from $1.16 billion the year before. The company lost $1.2 billion, compared to $1.46 billion in the same quarter the year before

Rivian announced a $5 billion investment from Volkswagen. However, only $1 billion of that is guaranteed. Rivian still faces a cash shortage.

Rivan faces the same challenges other EV companies do, including battery range and the number of charging stations. Perhaps as important, its SUVs and trucks are expensive, which creates another barrier to sales.

3 Glaring Problems Facing Rivian

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