Rivian has shifted its production strategy to save money and unveiled its next two vehicle offerings.
Share prices of electric vehicle (EV) maker Rivian Automotive (RIVN -0.30%) have been on the decline since it reported first-quarter production and delivery numbers earlier this week. But analysts at Cantor Fitzgerald think this presents investors with a new opportunity.
The firm maintained the equivalent of a buy rating on Rivian shares this week with a price target of $23. That would represent a massive 128% gain over the next 12 months or so from its current price.
This enthusiasm for the stock is all about what the company has planned for its next phase of growth.
More affordable electric vehicles (EVs)
This week, Rivian reported that it produced almost 14,000 vehicles in the first quarter, delivering more than 13,500 of them. That offered some proof that the EV start-up still expects to match last year’s production level of 57,000 units.
That report also led Cantor Fitzgerald to reaffirm its bullish call on Rivian shares. While Rivian doesn’t plan to increase production volume this year compared to last year’s level, it still expects to achieve a “modest” positive gross profit in the fourth quarter of 2024.
That is partly because of a strategy shift the company announced. It now plans to begin production of its next-generation EV platform models at its existing Illinois production factory. That will allow it to slow down capital spending it had planned for a second plant in Georgia. Cantor has based its price target on a 10-year discounted cash flow analysis, and that cash flow level could increase now thanks to the lower capital spending plans.
Rivian’s cash flow should also increase as it rolls out the new R2 vehicle line it unveiled last month. That fully electric, mid-size SUV will be offered at a base price of about $45,000. And that doesn’t consider any potential tax credits. Rivian also let investors know an even less expensive midsize crossover R3 platform will follow the R2 launch.
Investors will learn more details from the company when Rivian reports its full first-quarter results scheduled for May 7.
Howard Smith has positions in Rivian Automotive. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
