Shares of electric vehicle maker Rivian Automotive (NASDAQ:RIVN) dropped nearly 3% to $11.50 in premarket trading on Monday after Morgan Stanley downgraded the stock from "overweight" to "equal weight" and slashed its price target to $13 from $16.
The downgrade comes as the brokerage raises concerns over the capital intensity required for Rivian’s advanced driver-assistance systems, which are critical to its partnership with Volkswagen.
Morgan Stanley also revised Rivian's capital expenditure estimates upward by $200 million to $300 million per year starting in 2026.
The brokerage does not expect Rivian to achieve positive free cash flow before fiscal year 2029, reflecting ongoing challenges for the EV maker in managing costs.
Despite the downgrade, sentiment on Rivian's stock remains cautiously optimistic.
According to LSEG data, 15 of 29 brokerages rate the stock a "buy" or higher, 12 rate it a "hold," and two rate it a "sell," with a median price target of $17.
Year-to-date, Rivian's share price has fallen approximately 49%.