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The Ratings Game: Rivian taken ‘off road’ by supply-chain issues but could still come out on top, analysts say

Supply-chain woes may have knocked Rivian Automotive Inc. off course for now, but the electric-vehicle company held on to its status as one of the “more viable” EV startups, Wall Street analysts said Friday.

Rivian
RIVN,
-7.17%

late Thursday reported deeper quarterly losses than Wall Street expected, and dialed back its 2022 production goal to 25,000 EVs, mostly on supply-chain problems.

The stock fell more than 7% on Friday, following losses of more than 12% after the fourth-quarter report, and was on track for a record closing low. Rivian shares are nearly 80% off their record closing high of $172.01 on Nov. 16.

The supply-chain issues are taking Rivian “off-road in 2022, but (it is) still moving forward,” John Murphy with B. of A. said in a note to clients Friday.

At the time of its initial public offering, Rivian guided for 2022 production around 45,000 vehicles, Murphy said.

Some investors had extrapolated Rivian’s production targets from production outlooks for Lucid Group Inc.
LCID,
-4.79%
,
and had expected a production goal around 25,000 and 30,000 vehicles, so the outlook “was about as bad as feared,” Murphy said.

Murphy kept his buy rating on the stock, however, saying that Rivian remains “one of the most viable among the start-up EV automakers and also a relative competitive threat to incumbent automakers.”

Rivian stock has tumbled “on a growth sell-off, high expectations, and production ramp and supplier issues that caused a miss out of the gate and now a lowered 2022 view (as expected),” Joseph Spak with RBC said in his note.

“But we believe the bar has been reset and continue to have faith in management, the product, the business plan and the go-to-market strategy,” he said.

Among the positives that Rivian showed the Street on Thursday: Its recent production rate is about two times the end of 2021, Spak said. Battery constraints are not an issue anymore, and “improvement from current (production) rate should occur through the year,” he said.

Rivian Chief Executive RJ Scaringe said Thursday that the company’s “highest priority” for the year is ramping production. Rivian has the ability to deliver more than 50,000 of its electric pickup trucks and SUVs, if supply constraints weren’t in the way, he said.

Spak also highlighted that demand doesn’t seem to be an issue for Rivian and there could be “solid demand” for the slightly cheaper dual-motor models that Rivian hopes to have available in two years. Nonetheless, the analyst lowered his price target on the shares to $100, from $116.

Mark Delaney at Goldman Sachs kept the equivalent of a hold rating on Rivian shares, saying that supply-chain issues and also lower capital expenditures could “push out the timing/volume for units beyond 2022.”

“We expect the combination of the production ramp uncertainty and rising input costs … to be concerns for investors in the near to intermediate term,” Delaney said.

In the long-term, however, “we believe the company will work through these ramp and supply chain challenges, better leverage fixed costs per unit, and take advantage of engineering improvements,” he said.

Delaney also praised Rivian’s “solid order levels” and its “compelling” EVs.

Thursday’s report was Rivian’s second as a public company. The EV maker in November had one of the most successful initial public offerings in recent memory, its market capitalization quickly soared above valuations for Ford Motor Co.
F,
-0.55%

and General Motors Co.
GM,
+0.68%

Related: ‘It was never going to be easy’: Rivian is at a crossroads as it battles to win back Wall Street

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