Rivian Automotive Stock Has 26% Upside, According to This Wall Street Analyst

Rivian Automotive (RIVN 0.27%) received several downgrades from analysts in the wake of its fourth-quarter earnings report released on Feb. 21. Revenue more than doubled last year, but rising interest rates are starting to take a toll on electric vehicle (EV) demand. Management expects production in 2024 to be flat year over year at 57,000 units.

Morgan Stanley cut its price target on the stock to $14 from $24. The new price target is 26% higher than Rivian’s current share price. Despite the negative sentiment around the stock right now, Morgan Stanley is still optimistic about Rivian’s future, as it maintained an overweight (buy) rating on the stock.

Why Wall Street analysts remain bullish on Rivian’s long-term prospects

The average analyst recommendation still has a buy rating on the stock. Optimism on the company’s future is based on Rivian’s emerging brand in electric vehicles and sophisticated online car buying experience. It also continues to be backed by Amazon, which held 158 million shares of Rivian class A common stock at the end of 2023.

Vehicle sales are always going to fluctuate with the direction of interest rates, but the real reason investors are souring on Rivian is that the company is losing a lot of money. It needs to scale up its vehicle production to leverage its cost structure and turn a profit. But Rivian’s adjusted free cash flow was negative $1.4 billion in the fourth quarter, which was greater than the $1.3 billion it generated in revenue.

Wall Street’s short-term focus shouldn’t mean much to long-term investors, but analysts’ opinions can significantly impact the sentiment around the stock price. Rivian’s weak outlook means the stock isn’t likely to rebound until interest rates come down, or the company shows improvement in bringing costs down.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

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