In a recent appearance on CNBC’s ‘Power Lunch,’ Daniel Roeska, who leads the U.S. automotive research team at Bernstein, provided a sobering analysis of Rivian’s position in the electric vehicle (EV) market, particularly in comparison to Tesla (TSLA). Roeska initiated coverage on Rivian (RIVN) with an “Underperform” rating and a price target of $6.10, significantly lower than Rivian’s current $12.37 stock price, signaling a stark skepticism about the company’s future growth prospects.
Roeska’s valuation was based on a long-term outlook, projecting Rivian’s sales by 2030, applying a reasonable multiple, and then discounting back to the present. His analysis uncovered three key misconceptions: the overestimation of Rivian’s addressable market, the underestimation of necessary capital expenditure to achieve scale, and the often overlooked equity dilution from Rivian’s joint venture with Volkswagen, which could dilute shares by 20 to 40%.
Despite Rivian’s vehicles receiving high marks for owner satisfaction, their quality rankings are at the bottom according to Consumer Reports, highlighting issues with scale and production quality. Last year, Rivian managed to produce only 55,000 vehicles, a number dwarfed by traditional luxury car makers like Ferrari and Porsche, indicating a significant challenge in scaling operations.
When questioned about potential scenarios where Rivian might exceed expectations, Roeska remained cautious. Increasing production volumes would necessitate further capital investments, not necessarily translating into shareholder value. He suggested that Rivian’s path to outperformance might lie in developing and selling advanced driver-assistance systems or software to other manufacturers, but even these opportunities might only marginally improve the stock’s value.
Roeska’s analysis points to a fundamental issue for Rivian: the sheer amount of cash burn compared to Tesla. He noted that by the time Rivian reaches cash flow breakeven in Bernstein’s model, it would have burned through $23 billion more than Tesla did for the same milestone. This comparison underscores the financial and operational challenges Rivian faces in trying to catch up with Tesla in the EV race, especially in an industry where scale, efficiency, and technological innovation are critical to success.
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