Stock of Rivian Dubbed a Buy as Ev Company Comes Closest to Tesla Spirit

In the ever-evolving landscape of electric vehicles, Rivian Automotive Inc. has often been likened to Tesla, capturing a similar innovative spirit, according to Jefferies analyst Philippe Houchois. Despite holding a less optimistic outlook for Tesla Inc., Houchois initiated coverage on Rivian's stock with a buy rating and a $16 price target, signaling a potential 45% upside from the previous day's closing price. Rivian shares responded positively, climbing 5% in premarket trading.

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Houchois highlighted several aspects that contribute to Rivian's comparison with Tesla, characterizing it as a company with its own software stack, a robust brand identity, global potential, and shared growth challenges. However, he acknowledged differences, noting that Rivian's product concepts and manufacturing processes are currently more conventional than those of its electric vehicle counterpart.

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The analyst's positive stance on Rivian stems from the perception that the company has been afforded more time and capital than many other start-ups in the electric vehicle space, allowing it to navigate its trajectory more effectively. He sees two pivotal tests ahead for Rivian in the coming year. Firstly, the company needs to achieve viable levels of variable unit costs for its vehicles. Secondly, it must exhibit improved restraint on capital spending as it progresses with the development of its R2 platform and its newly established manufacturing facility in Georgia, which is expected to be discussed further in an upcoming event.

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While Rivian has set its sights on reaching breakeven gross margins in the fourth quarter of 2024, Houchois emphasizes the importance of closely monitoring the capital-expense profiles associated with the R2 platform and the Georgia plant. These factors will influence Rivian's ability to secure capital for what Houchois envisions as a more capital-efficient project compared to its initial R1 endeavor.

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The analyst estimates that Rivian has raised nearly $28 billion in equity since its inception. Looking ahead, he projects that the company will need to secure an additional $2.5 billion in new capital by the end of 2026. This strategic financial maneuvering is crucial for Rivian's success and will determine its ability to undertake a more capital-efficient project beyond the initial R1, aligning with the company's long-term goals and growth trajectory.

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As Rivian navigates the challenges and opportunities in the electric vehicle market, the analyst's coverage underscores the importance of balancing innovation, financial discipline, and strategic capital allocation for sustained success. The positive market response to Rivian's stock following the initiation of coverage reflects a growing interest in the company's unique position within the electric vehicle sector and its potential to carve out a significant niche in the evolving automotive landscape.

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