rivian stock

Rivian (NYSE: RIVN) stock is trading sharply lower in early US price action today after the company recalled nearly all the vehicles that it has delivered to date. While recalls are quite common in the automotive industry, markets are apprehensive about the execution abilities of RIVN.

The recalls are related to a faulty fastener which in the rare case scenario might lead to loss of steering control.

Rivian has recalled around 13,000 vehicles. To put that in perspective, Rivian produced only 14,317 cars in the first nine months of 2022. It started delivering cars only late in 2022 and has so far delivered only 13,198 cars until September. Notably, the deliveries trail production as some of the cars are in transit.

Rivian expects to produce 25,000 cars in 2022. To reach that goal, the company would need to produce 10,683 cars in the fourth quarter of the year. While reporting its Q3 2022 deliveries, Rivian reaffirmed its 2022 production guidance. However, Wall Street analysts are not so bullish and consensus estimates call for deliveries of 23,590 cars in the year.

The vehicle recall is yet another bad publicity for Rivian. Earlier this year, the company raised the prices for its vehicles, including for those buyers who had already made the reservation.

Usually, companies don’t hike prices for buyers who have a confirmed reservation. Eventually, RIVN admitted its mistake and waived the price hikes for those customers who already had a reservation.

Rivian Stock Falls After the Recall

Rivian stock has whipsawed since its IPO in 2021. The stock soared after the IPO and hit an all-time high of $179.47. Rivian was valued above $150 billion at one point which was higher than Ford as well as General Motors, both of which sell many more cars than Rivian.

However, amid the turmoil in the broader market, RIVN stock hit an all-time low of $19.25 and the market cap tumbled below $19 billion. Markets were valuing the business at nearly zero considering the massive cash on Rivian’s balance sheet.

David Trainer, CEO of investment research firm New Constructs indeed believes that Rivian along with Snap, Robinhood, and GameStop are among the companies that would fall to zero. However, not all analysts buy his pessimism towards Rivian. In August, Bank of America reiterated Rivian stock as a buy.

It said, “Despite what seems to be a tougher 2022 than initially envisioned and stock market volatility that has created challenges for some start-up EV OEMs in getting much needed low cost capital, our Buy rating on RIVN is predicated on our view that the company is one of the most viable among the start-up EV automakers and also a relative competitive threat to incumbent automakers.”

Analysts Find RIVN Stock as a Buy

George Gianarikas, senior analyst at Canaccord Genuity is also bullish on Rivian and is particularly bullish on its partnership with Amazon. The e-commerce and cloud giant is not only Rivian’s largest stockholder but has placed an order of 100,000 delivery vans with the company.

Gianarikas has a buy rating on Tesla stock also and sees the stock tripling from these levels. Many other analysts have also turned bullish on the Elon Musk-run company after President Joe Biden signed the Inflation Reduction Act of 2022.

Tesla is ramping up production and delivered a record number of cars in China in September. Its deliveries however trailed that of BYD which sold over twice the cars in the month. BYD has also snatched the title of the leading seller of new energy vehicles from Tesla.

Rivian has Partnered with Mercedes Benz

Rivian has partnered with Mercedes-Benz to produce electric vans. The deal might serve as a template for similar deals between other automakers.

As part of the agreement, the two companies would build a factory in Europe to produce electric vans. The two companies expect to start production at the plant in a “few years” but did not commit to a hard timeline.

However, Rivian still needs to prove its mettle when it comes to execution. Almost all the EV startups have fared poorly on execution which is making markets turn cautious about them.

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