By Rivian Automotive, the electric vehicle start-up, has experienced a series of ups and downs in the past week, much to the disappointment of Wall Street.
In a surprising turn of events, Rivian reported third-quarter deliveries of 15,564 units, surpassing analysts’ expectations of around 14,000 vehicles. Despite this positive news, shares of Rivian (ticker: RIVN) experienced a 2.6% decline as some investors decided to take profits. It is worth noting that the stock had seen a remarkable increase of over 50% prior to the delivery report.
However, things took a turn for the worse when Rivian announced its plan to raise additional cash by selling $1.5 billion in convertible notes on Thursday. This announcement led to a substantial drop of almost 23% in the company’s shares. While it is not uncommon for a stock to decline after a capital raise due to share dilution, such a significant drop was unexpected and poorly received by investors.
Wedbush analyst Dan Ives aptly summarized Rivian’s recent challenges in his report. He referred to the capital raise as a “gut punch” and expressed concern over the negative impact on the company’s street credibility. Despite this setback, Ives maintained his Buy rating for the stock but reduced his price target to $25 from $32 per share.
As of Monday trading, Rivian’s stock price dropped 5.5% to $17.88 per share. In comparison, the S&P 500 and Nasdaq Composite experienced smaller declines of 0.4% and 0.8%, respectively.
On a more positive note, Ives highlighted that Rivian appears to be making progress in addressing previous management, production, and supply chain issues that plagued the company in previous quarters.
Market Reaction to Rivian’s Growth and Expansion
Amidst Rivian’s continued growth and production expansion, investors’ patience is gradually wearing thin as unexpected developments pose challenges for the company. Rivian’s next stage of expansion involves securing additional capital to fund their plans. With the construction of a new assembly plant dedicated to their upcoming vehicle platform, known as “R2,” Rivian aims to introduce two more affordable vehicle models by 2026, alongside their existing R1S SUV and R1T pickup.
Maintaining a conservative balance sheet is generally regarded as a positive approach. Following a recent note sale, Rivian expects to bolster their cash reserves to surpass the $10 billion mark. This financial strength offers the company stability amid their ambitious growth plans.
Market analysts are closely monitoring Rivian’s progress and taking appropriate actions. Battle Road Research analyst Ben Rose downgraded the stock from Hold to Sell, highlighting concerns over the recent capital raise. However, Rose did not specify a target price for Rivian shares, implying an anticipation of underperformance relative to the market.
UBS analyst Joe Spak, on the other hand, expressed less surprise regarding the capital raise, indicating that he had previously projected a need for approximately $5 billion in additional capital by mid-2025. Following recent developments, Spak has adjusted his estimate to $3.5 billion. Spak rates Rivian shares as Hold with a price target of $26.
An analysis of analyst recommendations reveals that around 58% of analysts covering Rivian stock rate it as a Buy. In comparison, the average Buy-rating ratio for stocks within the S&P 500 stands at approximately 55%. On average, analysts have assigned a price target of around $28 per share.
In summary, Rivian’s growth and expansion plans have spurred market reactions and varying opinions among analysts. While some express concerns and downgrade their recommendations, others anticipate the company’s potential and adjust their projections accordingly.
Comments