Morgan Stanley has issued a sharp warning to investors after downgrading Rivian stock (NASDAQ: RIVN) from Equalweight to Underweight, setting a new price target of $12.00—far below Rivian’s current trading level of $17.95. With shares hovering near their 52-week high of $18.60, analysts argue the stock is overvalued, especially given Rivian’s ongoing profitability challenges and the increasingly difficult landscape for electric vehicle manufacturers.
Why Morgan Stanley Is Bearish on Rivian Stock
The downgrade centers largely on Rivian’s upcoming R2 crossover launch, scheduled for 2026. Although the R2 platform has generated considerable excitement among EV enthusiasts, Morgan Stanley believes the launch faces steep obstacles at a time when the broader EV market is cooling.
The investment bank outlined several headwinds:
- Slowing electric vehicle adoption
- Loss of the $7,500 federal tax credit
- Consumer uncertainty about charging infrastructure
- Persistent range anxiety concerns
- Weak residual values and affordability issues
- Battery technology constraints
Morgan Stanley forecasts a $2.9 billion adjusted EBIT loss in 2026 for Rivian, accompanied by a $4.2 billion free cash flow burn. This includes roughly $300 million in working capital requirements and $1.6 billion allocated to capital expenditures.
Volkswagen Partnership and AI Day Outlook
Rivian is expected to receive its next investment tranche from Volkswagen after completing winter testing in Q1 2026. Analysts say the extra capital will help keep operations running but does little to solve the company’s long-term profitability issues.
Rivian is also set to host an AI Day on December 11, where it may unveil updates on autonomous driving features and its next-generation vehicle architecture. Markets will be watching closely to see if any announcements can shift sentiment around Rivian stock.
Recent Challenges: Major Recall Hits Rivian
Adding to its challenges, Rivian recently announced a recall of 34,824 vehicles in the U.S. due to a seat belt pretension cable defect discovered by the National Highway Traffic Safety Administration. The recall impacts certain 2022–2025 EDV models and addresses a safety issue that could increase injury risk during a crash.
This recall has put additional pressure on Rivian’s operational outlook as the company continues trying to scale production while maintaining quality and safety standards.
Positive Analyst Activity Still Exists
Despite Morgan Stanley’s bearish stance, other analysts remain optimistic:
- Stifel raised its price target to $17, citing strong software and services revenue and improving profitability in Q3 2025.
- Tigress Financial Partners boosted its price target to $25, pointing to Rivian’s advancements in AI, autonomy, and manufacturing scale.
- RBC Capital maintained a Sector Perform rating, noting Rivian’s strategic pivot toward autonomous driving—including progress on Level 3 self-driving capabilities.
These mixed opinions highlight the uncertainty surrounding Rivian’s future—balancing strong innovation with significant financial risk.
Rivian Stock: What Investors Should Watch Next
As Rivian navigates recalls, high cash burn, and the challenging EV environment, investors will be focused on:
- Progress toward profitability
- Updates from the December AI Day
- R2 platform development milestones
- Volkswagen partnership funding
- Customer demand trends heading into 2026
Morgan Stanley’s downgrade serves as a reminder that Rivian’s road ahead remains steep. While the company has shown impressive innovation and strong brand momentum, the pressure is now on its leadership to demonstrate financial discipline and deliver on upcoming product launches—especially as Rivian stock trades near the top of its recent range.
