Following third-quarter earnings from electric vehicle manufacturers, an analyst at Needham reiterated his bullish stance on Rivian Automotive, Inc. (NASDAQ: RIVN) and stepped to the sidelines on peer Lucid Group, Inc. (NASDAQ: LCID).
The EV Analyst: Chris Pierce reiterated a Buy rating and $25 price target for Rivian, which also remained in Needham's "Conviction List" stocks.
The analyst downgraded Lucid stock from Buy to Hold. The firm also has Hold ratings on Tesla, Inc. (NASDAQ: TSLA) and Fisker, Inc. (NASDAQ: FSR).
Underappreciated Winner: Rivian continues to look like an underappreciated winner in the ICE to EV transition amid increasingly negative sentiment towards broad EV adoption," said Pierce in a note. He added that Needham's latest round of used-EV price checks pointed toward strong demand for Rivian instead of excess supply across the broader industry.
"RIVN is now our only Buy-rated stock across our EV OEM coverage," Pierce said. He attributed his lukewarm sentiment toward other EV makers to higher uncertainty around demand and/or production.
"RIVN is the only supply-constrained OEM within our coverage, with pricing power and longer-term brand halo effects driving higher confidence in TAM expansion," the analyst said. He also expressed optimism regarding Rivian's lower-priced R2 platform.
Tempered Outlook For Lucid: Pierce said the downgrade of Lucid stock was due to Needham's downgraded unit estimates for the Newark, California-based company. He said the estimate revision came on the back of Lucid's uninspiring third-quarter results and commentary.
Also., the analyst said he was now less optimistic about Lucid's ability to license its industry-leading EV efficiency technology to Aston Martin. That analyst, however, held a positive view of Lucid's recently unveiled Gravity SUV.
Fisker's Demand Uninspiring: Like Lucid, Fisker is also demand-constrained, Pierce said.
The analyst said Tesla's pushback: Tesla's margin profile is a cause for concern. He also expressed high skepticism regarding the Elon Musk-led company's growth levers, such as fully-self driving software, Tesla Bot, and AI.
Although Tesla's core auto gross margin, excluding regulatory credit, may have bottomed, it would inflect higher by only a minimal degree in 2024, Pierce said. This is due to the company's willingness to use price as a weapon in 2023 consistently.
"We are ahead of consensus on TSLA deliveries in '24 and beyond, viewing TSLA as likely to continue preferencing volume over margins, , raising the bar to own the stock," the analyst said.
Rivian shares fell 0.61% to $16.33 in premarket trading on Monday, according to Benzinga Pro data. Lucid fell 1.42% to $4.18, while Tesla edged up 0.10% to $235.68.