Rivian (BANK) went public last November and the market immediately took the latest EV darling to heart, sending stocks soaring in the first few weeks of trading. But those happy times are no longer with us, and the new EV stalwart has paid the price for a big shift in sentiment.
In Rivian’s case, the stock felt the impact of the sell-off on growth, but also because of other, more company-specific issues. These include exuberant expectations and problems with ramping up production and suppliers.
The result is a stock that has lost 78% of its value since the November highs; these were achieved just weeks after the company’s IPO.
There was also no respite for the smashed stock last week, following the release of 4Q21 financials.
The company missed both revenue and bottom line, but more importantly, the startup is plagued by supply chain issues that have led to a reduced outlook.
Semiconductors, wiring harnesses and electronics bottlenecks were all behind the halving of 2022 production forecasts. Rivian now expects to deliver 25,000 vehicles this year. While that’s roughly in line with recent forecasts from RBC’s Joseph Spak, the analyst believes the wider street was looking for a number somewhere in the region of 30,000.
That said, the analyst thinks the company could take the conservative route, providing “some cushion in the outlook.”
Either way, given the long-term implications, Spak views the problem as negligible and believes the company remains on the verge of success. However, investors might have to be stoic in the meantime.
“The truth is that a few thousand units shouldn’t make a big difference to the investment case,” the analyst said. “We understand that RIVN needs to show progress on the production ramp and restore investor confidence. It could take some time and RIVN has a very ambitious plan. but we see a very favorable risk/reward ratio at these levels for patient investors.
To that end, Spak is sticking to its outperform (i.e. buy) rating on RIVN, although the price target is reduced from $116 to $100. Nevertheless, this new price target could still generate massive returns of 170%. (To see Spak’s track record, Click here)
Most analysts stay in Rivian’s corner but not all are on board. Based on 9 buys versus 5 takes, the stock has a moderate buy consensus rating. However, the average price target remains optimistic; at $76.5, the figure suggests the stock could rise 107% in the coming year. (See RIVN stock analysis on TipRanks)
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