Piper Sandler thinks electrical automobile maker Rivian wants to handle funding headwinds to compete with Tesla. The agency downgraded Rivian to impartial from chubby Thursday. Piper additionally slashed its value goal to $15 per share from $63 per share. The brand new goal factors to marginal upside from Thursday’s shut. “We nonetheless like Rivian’s technique, which makes use of vertical integration to seize profitable after-sales income (e.g. software program, service, and charging),” analyst Alexander Potter wrote. “The issue is, this technique is expensive. To ensure that RIVN to justify its value construction, the corporate should unfold its funding over thousands and thousands of models (identical to Tesla does), and in an effort to finance such aggressive enlargement, RIVN will want capital.” Potter added that, for Rivian to enhance its money burn, the corporate should handle excessive prices related to controlling each facet of auto manufacturing from begin to end — as rival Tesla does. He says the corporate has the model to compete with the higher-end phase of the business, however might want to minimize prices and outsource some manufacturing like batteries and software program. The agency’s downgrade largely stems from Piper Sandler evaluating Rivian at e book worth versus a valuation primarily based on discounted money circulate. Potter mentioned his earlier score was primarily based off of the corporate producing greater than three million autos yearly, whereas the corporate is at present making roughly 500,000 to 700,000 autos per 12 months. “Given money constraints and disobliging capital markets, we predict most buyers are at present unwilling to pay for RIVN’s long-term prospects,” Potter mentioned. Rivian shares fell greater than 3% following the downgrade. The shares has struggled this 12 months, dropping 22%. Over the previous 12 months, it is down 64.6%. — CNBC’s Michael Bloom contributed to this report.
