Bank of America Downgrades Rivian Rating

Bank of America has cut its rating on Rivian (NASDAQ:RIVN) shares from Buy to Neutral, citing a challenging path to positive gross margins.

The firm also adjusted Rivian's price objective from $20 down to $13.

This downgrade follows Rivian's third-quarter 2024 results, which missed both BofA's and consensus estimates. The company's adjusted EBITDA loss was approximately $760 million, more significant than the expected losses of $510 million by BofA and $650 million by consensus.

Rivian's gross margin was reported at negative 45%, a far steeper loss than the anticipated negative 22% from analysts.

Rivian has updated its 2024 outlook, now projecting an adjusted EBITDA loss between $2.825 billion and $2.875 billion, compared to the previous estimate of $2.7 billion. The production forecast remains at 47,000 to 49,000 units, with expected deliveries between 50,500 and 52,000 units.

Despite these projections, Rivian anticipates a modest gross profit in the fourth quarter of 2024, bolstered by approximately $300 million in regulatory credits for the full year, with $275 million expected in the fourth quarter alone.

The bank notes that while Rivian is on track to achieve a positive gross margin by the fourth quarter of 2024, this will be partly due to regulatory credits, which may be uncertain under potential regulatory changes with a Trump administration.

“We also now expect only moderate growth in deliveries in 2025,” analysts led by John Murphy noted. “This is in part due to a more challenging demand environment and production limitations due to downtime in 2H25.”

BofA also highlights the arrival of new competitors like the Lucid (NASDAQ:LCID) Gravity SUV, expected to enter the market this quarter, and the potential for regulatory changes based on the US elections.

Analysts warn that changes might make it harder for consumers to access IRA credits and could disrupt regulatory credit pricing, thereby further pressuring profitability.

BofA notes that Rivian's gross margin is expected to fluctuate, potentially swinging between positive and negative values in the upcoming quarters.