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As 2025 approaches, there are many stocks with high potential that investors can buy. However, Rivian Automotive (RIVN -4.87%) is not one of them.
One analyst who follows the stock insists it's definitely a selling opportunity, even though he recently raised his price target significantly. Here's a closer look at the analyst's bearish take on the high-profile electric vehicle (EV) company.
On Friday, CFRA's Garrett Nelson raised his price target for Rivian to $8 per share, up 60% from $5 previously. In any case, he's sticking with his sell recommendation because even with the upgrade, the current price target is still 51% below the stock's recent close.
During the day, several analysts revised their assessments of Rivian. That's because the company reported fourth-quarter and annual production and delivery figures this morning. To the delight of shareholders, both figures beat consensus forecasts; Quarterly production was 12,727 units and deliveries were 14,183 units.
The numbers also beat Nelson's forecasts, but he noted that the market should be focusing on other issues. He expressed doubt that the company could achieve a positive gross margin on sales, even though it would like to do so. He also argued that the historically unprofitable electric car maker's cash burn rate remains worryingly high.
Rivian's latest news is almost unquestionably positive, but achieving success in the automotive industry is a mountain to climb.
Scale is key because producing any type of car today requires extremely intensive capital and resources; Even the most powerful companies in the industry sometimes struggle to make decent profits. Rivian has yet to prove that it can achieve the scale needed to become a reliably profitable operator, and given this, I am cautious on the stock.
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