Rivian Automotive (NASDAQ:RIVN) The stock, like most stocks, faltered on Wednesday after higher-than-expected inflation data dashed investors’ hopes for a series of interest rate cuts from the Federal Reserve in 2024. But there’s no need to worry, he says Bank of America.
Inflation or no inflation and interest rate cuts or no interest rate cuts… Rivian’s stock price will more than double within a year to reach $21 per share, according to BofA analysts.
Is Rivian Stock a Buy?
Rivian stock closed just shy of $11 a share on Tuesday before the price target was announced, so a rise to $21 a share would mean a return of about 98% for new investors over the next year. This is pretty exciting news for investors If BofA analyst John Murphy is right. But Is He’s right?
According to Murphy, investors are focused on car buyers’ demand for electric vehicles – so it makes sense to say that “demand” is important to Rivian. Last year, Rivian produced 57,232 electric trucks… but demand because they were so weak that only 50,122 of them could be delivered to willing buyers. In the short term, what’s really important for Rivian is to stimulate demand – which is probably why Rivian just offered to do $5,000 worth of free paint jobs on new Rivian purchases to stimulate demand.
However, in the longer term, I think Rivian has the ability to do this to produce — particularly the ability to produce the new R2 and R3 electric SUVs — is a bigger factor in whether Rivian’s inventory will double.
That’s because producing and trying to sell only R1T electric trucks and R1S electric SUVs costs Rivian nearly $6 billion in cash annually. But only Rivian has about $9.4 billion in the bank. So if Rivian fails to begin R2 production within the next 18 months, Rivian will run out of money and will need to raise more to complete its project.
By the way, Rivian’s R2 is scheduled to go on sale in early 2026, more than 18 months away. Regardless of “demand,” delays in production of the new electric vehicle will only worsen Rivian’s liquidity situation. Be careful, Rivian investors.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.
Rivian stock has a 98% upside potential, according to 1 Wall Street analyst, originally reported by The Motley Fool