Shares of electric vehicle manufacturer Rivian (NASDAQ:RIVN) gained 4% on Tuesday, following an upgrade from "Neutral" to "Buy" by UBS analyst Joseph Spak. This increase occurred despite a preceding 20% stock plunge and a decrease in Spak's price target from $26 to $24. The new price target suggests a potential upside of over 27% from its recent close at $18.78.
Rivian recently issued a $1.5 billion green convertible note and announced disappointing preliminary Q3 results, leading to more than a 22% downturn in its shares this month. However, Spak views this as a buying opportunity, expecting the market to refocus on Rivian's improving fundamentals.
Spak also predicts that Rivian's production in 2023 will surpass guidance at around 54,500 units and anticipates a positive gross margin by the fourth quarter of 2024, despite potential volatility due to plant re-rating. He further highlights the potential of Rivian's upcoming products as a catalyst for growth, anticipating a tenfold increase in unit growth by 2023 due to increasing affordability.
Despite these optimistic projections, Rivian experienced a -13.42% 1-week and -18.7% 1-month total price return amidst market volatility. The company currently has a market capitalization of $17.81B and a negative P/E ratio of -3.61, indicating that it is not expected to turn profitable this year according to insights from InvestingPro’s premium services.
However, Spak points out that Rivian has more cash than debt and consistent earnings per share growth, suggesting strong fundamentals. He also sees a reduced likelihood of an additional capital raise until late 2025.
While Rivian's shares are up by 1.9% YTD, they have lost over 26% in the past three months. The company's upcoming earnings release is also expected to influence its future prospects.
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