By Stocks have the potential to become attractive investments in the eyes of Wall Street analysts, and there are several factors that can contribute to such a transformation. These factors can include new management, the introduction of new products, or a renewed focus on cost management. However, sometimes it is the investors themselves who single-handedly turn stocks into enticing opportunities.
Rivian Automotive: Upgraded to Buy
UBS analyst Joseph Spak recently made a significant move by upgrading shares of Rivian Automotive (ticker: RIVN) from Hold to Buy. Interestingly, even though Spak reduced his price target by $2 to $24 per share, this upgrade is uncommon.
An Unusual Upgrade with a Target Cut
The recent trading activity involving Rivian stock sheds light on the unusual upgrade. At the end of September, Rivian shares closed above $24 each, which was only 7% below Spak’s previous price target of $26. Consequently, this wasn’t compelling enough to warrant a Buy rating.
A Surprising Capital Raise
However, on October 5, Rivian surprised both investors and industry experts by successfully raising $1.5 billion in capital. As a result, the company’s shares closed at $18.78 on Monday, roughly 28% lower than Spak’s new price target. This significant decrease in the stock price has made Rivian an attractive buy for many investors.
Managing Expectations
It is worth noting that Spak anticipated the capital raise by Rivian, as it is a start-up company. In fact, he originally expected the company to raise approximately $5 billion over the next two to three years. With the recent influx of new cash, Spak now believes that Rivian will raise $3.5 billion.
In conclusion, even though the price target was lowered, the timing of the capital raise makes Rivian stock an appealing investment opportunity, prompting the upgrade to a Buy rating.
Rivian’s Fundamentals Improve, Stock Receives New Buy Rating
In a positive turn of events, Rivian’s fundamentals are showing signs of improvement as production and sales continue to rise. Analysts are forecasting a production of approximately 55,000 units in 2023, surpassing Rivian’s initial guidance of 52,000 units.
During the first nine months of 2023, Rivian has already produced nearly 40,000 units, a significant increase from the approximately 14,000 units produced during the same period in 2022.
This improvement in fundamentals, coupled with a lower stock price resulting from what may have been an overreaction by investors, has prompted a new Buy rating for Rivian.
Following the positive call, Rivian stock experienced a 3.1% increase in premarket trading, reaching $19.37 per share. Meanwhile, S&P 500 and Nasdaq Composite futures also saw modest gains.
With the recent rating by Spak, approximately 62% of analysts covering Rivian’s stock now have a Buy rating. This surpasses the average Buy-rating ratio of about 55% for stocks in the S&P 500. Furthermore, the average analyst price target for Rivian is approximately $28 per share, slightly higher than Spak’s estimate.
Looking at the past year, Rivian stock has declined by around 40%. Factors such as rising interest rates and increased competition in the electric-vehicle market have dampened investor enthusiasm for start-up stocks.
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