Rivian Automotive Inc. (RIVN) had a rough Monday morning, with shares dropping after Morgan Stanley turned bearish on the electric vehicle maker. The firm downgraded Rivian to Underweight from Equal Weight and slapped a $12 price target on the stock, suggesting about 25% downside from recent trading levels.

Why the Downgrade?

Analyst Andrew Percoco didn't mince words, pointing to "outsized risk" as Rivian heads into 2026. The main concern? The launch of Rivian's cheaper R2 model is walking straight into what he calls a "challenging EV market." Consumer adoption is slowing, the $7,500 federal tax credit is going away, and buyers are still worried about range and charging infrastructure.

On the financial side, Morgan Stanley is even less optimistic. The firm projects Rivian will burn through $4.2 billion in free cash flow during 2026 and warns that the R2 might actually steal sales from the company's flagship R1 vehicles. Not exactly the growth story investors were hoping for.

A Tough News Cycle

The downgrade arrives at an already difficult moment for the automaker. Regulators recently announced a recall affecting nearly 35,000 vehicles due to potential seatbelt failures in certain delivery van models. Making matters worse for investor confidence, filings revealed that CEO RJ Scaringe sold more than $1.13 million worth of company stock throughout November.

What's Next for Rivian?

Investors are now turning their attention to Rivian's AI Day on December 11, hoping it might steady the ship. The event should provide updates on the company's autonomous driving technology and clarity around the timeline for its important capital partnership with Volkswagen.

Interestingly, despite all the fundamental concerns, Benzinga Edge data shows Rivian scoring a strong 82.71 on momentum, with short, medium, and long-term price trends still tracking positive.

Price Action

Rivian shares were down 3.73% at $17.28 on Monday. The stock is currently trading about 1.9% below its 50-day moving average and roughly 10.5% below its 200-day moving average, suggesting continued downward pressure as it sits beneath both key trend indicators.