The electric vehicle (EV) sector’s woes continue to cloud the narrative, with upstart manufacturer Rivian (NASDAQ:RIVN) again dubiously drawing the spotlight. Recently, Mizuho analysts led by Vijay Rakesh downgraded their assessment of RIVN stock along with other EV players. While they believe in the bigger picture, they’re concerned about nearer-term headwinds impacting the price.
According to a Seeking Alpha report, Rakesh downgraded RIVN stock to “neutral,” a rating the expert also imposed on Tesla (NASDAQ:TSLA) and Nio (NYSE:NIO). Adding to Rivian’s problems, Rakesh also slashed the price target to $12, implying only 11% upside from Friday’s close. Previously, the target stood at $24. Subsequently, RIVN shares dipped about 2% before attempting to claw back some of the losses in afternoon trading.
While Rakesh is overall constructive on the long-term EV landscape, near-term concerns could moderate growth rates. In particular, slowing EV demand and tightening liquidity may present challenges until the end of 2025. As if to emphasize the point, Mizuho analysts maintained a “buy” on legacy automotive giant General Motors (NYSE:GM).
Credibility Issues Hang Over RIVN Stock
While Rivian has become one of the more desirable EV brands with its sleek electric-powered pickup trucks and SUVs, it also faces significant credibility challenges. In particular, it holds $9.37 billion in cash and equivalents but its free cash flow for the fourth quarter last year came out to a loss of $1.4 billion. Therefore, cash burn remains an ongoing concern.
Outside factors also exacerbate this problem for RIVN stock. As Mizuho analysts pointed out, a price war in the Chinese EV market disrupts international ambitions for the EV industry. And even if a company didn’t specifically have plans to enter China, vehicles from the world’s second-biggest economy could spill over to other nations, thus negatively affecting competitiveness.
In addition, Tesla launched a price war of its own that has hurt the industry. Combined with cuts in EV subsidies in the U.S. and European Union, consumer accessibility has become a serious issue. Notably, major automakers have begun scaling back or delaying their transition to electric-powered mobility. With that, RIVN stock hangs in a wait-and-see mode.
Why It Matters
Right now, analysts overall rate RIVN stock as a moderate buy. This assessment breaks down as 13 buys, eight holds and three sells. The average price target lands at $18.24, implying a 71% upside potential from the time-of-writing price. Finally, the most optimistic target runs up to $36.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
