In a note on Friday, analysts at Morgan Stanley expressed that Rivian Automotive (NASDAQ) is “uniquely positioned within autos” to scale a fully integrated software stack, which is crucial for leveraging AI opportunities.
The investment bank recently hosted Rivian CEO RJ Scaringe and his team for an investor lunch at their Manhattan headquarters. During this event, the management reiterated their confidence in achieving a positive gross margin by the fourth quarter of 2024. This goal is expected to be met through reductions in the bill of materials (BOM) costs, standard plant conversions, and regulatory credit advantages as traditional OEMs scale back on EVs and instead purchase credits to comply with EPA regulations.
“Mr. Scaringe also highlighted Rivian’s structural advantages in their fully integrated software and perception stack and the potential for partnerships,” noted Morgan Stanley, emphasizing that this aspect occupied a significant portion of the interactive discussion with a mix of auto and tech investors.
Morgan Stanley reaffirmed its Overweight rating and $13 price target for Rivian, advising caution in profitability outlooks due to the ongoing slowdown in the EV sector.
“The management’s ability to manage burn rates (and the associated risk of equity dilution) is crucial to enhancing the ‘time value’ of the strategic AI option,” the bank concluded.
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