Rivian sold stock to the public in November.
Courtesy Rivian
Rivian Automotive stock hit another milestone on Wednesday. It received its first big price-target cut from a Wall Street analyst. Lower targets can hurt stocks, but Rivian shares are rising anyway because investors are focused on something else.
Wednesday, J.P. Morgan analyst Ryan Brinkman cut his target price for Rivian’s struggling stock (ticker: RIVN) to $84 from $104, noting a slide in shares of other high-growth companies. Brinkman continues to rate the electric-vehicle maker at the equivalent of Hold.
Rivian shares are up regardless of the cut, with a gain of about 8.5% to $64.70. The S&P 500 and Dow Jones Industrial Average rose about 1.4% and 0.8%, respectively.
Rising production is trumping the price cut in Wednesday trading. Bloomberg reported that production at Rivian’s Illinois plant is rising to about 200 units a week. Rivian didn’t immediately respond to a request for comment.
Production needs to average about 800 units a week this year to hit Wall Street estimates for about 40,000 deliveries in 2022. Rivian produced 1,015 vehicles between mid-September and the end of 2021, delivering 920.
Despite the Wednesday move higher, Rivian shares are still down about 41% year to date. They are off about 66% from their recent high of almost $180 a share.
Rivian’s fourth-quarter production was a little lower than expected, something that hurt investor sentiment early in the year. The timing of production of a few hundred units, however, is no big deal to Brinkman.
“Our slightly lower expectation for 4Q Rivian builds …has no impact on valuation,and our out-year estimates and overall view are essentially unchanged,” wrote Brinkman. “Rather, the reduction in our price target is a consequence of a higher assumed discount rate …as the high growth platforms referenced in our Rivian comp sheet …at the time of our [coverage] initiation have experienced significant multiple contraction.”
His concern is the condition of other growth stocks. The Russell 1000 Growth Index is down about 12% year to date. And some of the highest-growth names that Brinkman used to value Rivian shares, including Nvidia (NVDA) and Peloton Interactive (PTON), are down more. Nvidia and Peloton shares have lost 22% and 25% year to date, respectively
It’s the big first cut from Wall Street analysts. Brinkman’s cut amounts to almost 20% of his prior target. Goldman Sachs analyst Mark Delaney and Barclay’s analyst Brian Johnson have also moved target prices. But their adjustments haven’t amounted to more than a few dollars. Both Johnson and Delaney rate Rivian stock at Hold, too.
Rivian sold shares to the public back on Nov. 9. Analysts picked up coverage of the stock in early December. Now there has been a big target-price reduction. It is almost like an additional rite of passage for the new company.
When analysts first published ratings on Rivian, the calls were very positive. About 69% of analysts covering the stock rated the shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%, while only about 46% of analysts covering Tesla (TSLA) rate shares at Buy.
The average price target for Tesla stock is about $918, close to where the shares are trading. The average analyst price target for Rivian is about $133, up 123% from recent levels.
The Brinkman target-price cut took a little more than $1 off the average call.
Next up for Rivian stock will be upgrades or downgrades. Shares haven’t faced either of those yet.
Write to Al Root at [email protected]
