Rivian stock (NYSE: RIVN) stock fell to an intraday low of $14 on Friday as the US stock markets crashed after the failure of SVB. What’s next for the EV (electric vehicle) stock amid the broader market turmoil?
2022 was a year of reckoning for EV stocks. Tesla, which is pretty much the bellwether for the sector fell 65% and had its worst year ever. Some of the other EV names fared even poorly and Lucid Motors and Xpeng Motors both lost over 80% in the year.
Rivian stock too fell 80% in 2022 and after a brief rally in January, the stock saw selling pressure and eventually hit a record low on Friday.
Based on Friday’s closing prices, Rivian had a market cap of just above $13.1 billion. At its peak, Rivian’s market cap was $153 billion, in excess of Volkswagen’s then valuation, while Lucid Motors’ market cap rose as high as $91 billion at the peak.
Why is Rivian Stock Falling?
We have a broader market sell-off and loss-making growth names like Rivian are among the worst affected due to the Fed’s rate hikes. Newly listed companies have fared quite poorly and the Renaissance IPO ETF lost over 50% in 2022 while the S&P 500 fell a little under 20%.
EV startups including Rivian have also disappointed markets with execution. Rivian missed even the toned-down 25,000 production guidance in 2022 and it’s 2023 guidance of 50,000 also trailed estimates.
However, the company emphasized that its production is constrained by supply chain issues.
Nonetheless, like Lucid, Rivian also stopped providing reservation numbers. The move further raised fears of slowing demand.
Tesla said that it expects to produce 1.8 million cars in 2023. While it would imply a YoY growth of only about 31%, Musk said that the company could produce as many as two million cars in 2023.
Rivian is currently posting gross losses and also expects to post a negative gross margin in 2023, although it is forecasting positive gross margins for 2024.
Earlier this month, Rivian announced a $1.3 billion convertible bond issue to shore up its balance sheet.
Bank of America Says Rivian Stock is Set to Rally
Despite the soaring market sentiments towards EV stocks, Bank of America sounded upbeat on Rivian stock and assigned it a price target of $40, which implies an upside potential of 182% over current prices.
Notably, while markets were spooked by Rivian’s capital raise, Bank of America analyst John Murphy resumed coverage with a buy rating.
In his note, Murphy said, “We believe the company opted for an earlier round of financing to ensure that financial resources are sufficient to bridge the company to profitability and avoid larger last minute financing rounds, which may prompt nervousness across the investor base.”
He added that Rivian is the most “viable” company compared to other startup EV companies. Notably, RIVN is backed by Amazon and the e-commerce giant has placed a massive 100,000 electric delivery van order with Rivian.
What’s Next for RIVN Stock amid the Macro Turmoil?
Meanwhile, even as Bank of America has issued an upbeat note on Rivian, Wolfe has downgraded Tesla from outperform to peer perform. The brokerage upgraded Tesla in September after the passage of the Inflation Reduction Act of 2022.
Now, it is apprehensive about Tesla amid the macro slowdown and the price cuts as Tesla has had to lower prices in many markets in a bid to spur sales. Some of the other automakers like Ford and Xpeng Motors have also cut prices to remain competitive.
Rivian has meanwhile avoided price cuts so far. However, if the EV price war escalates further amid slowing demand growth, other EV companies including Rivian might need to adjust their pricing in line with market trends.
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