Mizuho Maintains Buy Rating on Rivian Automotive, Adjusts Price Target as Production Ramps Up

Investment firm Mizuho has reiterated its Buy rating on Rivian Automotive (NASDAQ:), but has adjusted its 12-month price target on the stock to $27.00 from $30.00. The adjustment comes as Rivian focuses on increasing production and preparing its factories for expanded capacity.

In a recent note, analysts highlighted that Rivian faced ongoing supply chain constraints, particularly related to SiC and IGBT suppliers, as well as the temporary shutdown of EDV lines for Enduro and LFP battery retooling. As a result, Rivian produced only 10.4k vehicles in the recent quarter (MarQ). However, the company remains committed to its production target of 50k vehicles for C23E.

Analysts also pointed out that Rivian expects the introduction of Enduro and LFP technologies to lower the Bill of Materials (BOM) by approximately 25%, contributing to improved long-term profitability. Additionally, the company anticipates selling higher-priced R1 units. However, with some rerates in the R1 line and a single shift of EDV production in 1H24E, Mizuho revised down its delivery estimates for F24E and F25E. The revised estimates now stand at 48k/92k/115k for F23E/F24E/F25E, compared to the previous estimates of 48k/99k/140k. For C24E, Mizuho projects deliveries of 68k/24k.

Despite the revisions, analysts remain optimistic that Rivian is on track to achieve its reiterated production target of approximately 50k units in 2023. They believe that planned line downs in 1H24E, aimed at incorporating next-gen network architecture and zonal controllers, simplifying wire harnesses, and introducing the R1 LFP battery, will help Rivian reach an annual capacity of around 85k units at its Normal factory by the end of 2024, with full production of 85k units expected in 2025.

To align with the planned line downs in 1H24, Mizuho has adjusted its production estimate for 2024 to 68k units from the previous estimate of 78k. As for the EDV, Mizuho anticipates that Rivian’s Normal, IL factory will have a capacity of approximately 65k units. However, Mizuho expects the automaker to run only one production shift, leading to a modest increase in the 2024 EDV estimate to around 24k units from 21k.

In other news, Rivian recently announced its decision to adopt Tesla’s North America Charging Standard (NACS), following the footsteps of Ford (NYSE:) and General Motors (NYSE:). This move will enable Rivian vehicles to access Tesla’s Supercharger network. Starting in 1H24, Rivian will offer an NACS adapter, allowing current vehicles to charge on the Tesla network. Furthermore, NACS charge ports will become standard on R1S and R1T models from 2025E onwards.

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