Rivian Stock Rises on Upgrade. Sometimes the Market Gives You a Gift.

Rivian Automotive (RIVN) received a significant boost as UBS analyst Joseph Spak upgraded the stock to a Buy rating from Hold. While the price target was lowered to $24 per share from $26, this unusual move was driven by recent developments in Rivian’s stock performance.

During September, Rivian shares closed above $24, just 7% shy of Spak’s previous price target. However, it was the unexpected $1.5 billion capital raise on October 5 that caught investors and Wall Street off guard. As a result, Rivian stock closed at $18.78 on Monday, approximately 28% below Spak’s revised target, making it an attractive opportunity for a Buy rating.

Spak, who anticipated Rivian’s need for capital due to its start-up nature, now expects the company to raise $3.5 billion after the recent cash infusion, instead of the previously estimated $5 billion over the next two to three years. Additionally, he foresees improved fundamentals for Rivian, with production and sales on the rise. While Rivian’s guidance projected around 52,000 units of production in 2023, Spak predicts a more optimistic figure of approximately 55,000 units.

Rivian has already produced nearly 40,000 units in the first nine months of 2023, a significant increase compared to the approximately 14,000 units produced during the same period in 2022. With better fundamentals and a lower stock price resulting from what may have been an overreaction by investors, Spak’s Buy rating is well-founded.

Following the bullish call, Rivian stock saw a 3.1% increase in premarket trading, reaching $19.37 per share. This positive sentiment also translated to modest gains in S&P 500 and Nasdaq Composite futures. Spak’s upgrade brings the total number of analysts covering Rivian to rate the stock as Buy to 62%, surpassing the average Buy-rating ratio for stocks in the S&P 500, which stands at approximately 55%.

The average analyst price target for Rivian is around $28 per share, slightly higher than Spak’s revised target. Despite a 40% decline in Rivian stock over the past 12 months, largely influenced by rising interest rates and increased competition in the electric vehicle market, this recent upgrade provides a glimmer of hope for investors.

Rivian’s progress in production and sales, coupled with the positive outlook from analysts, suggests that the company is on the right track. As Rivian continues to innovate and expand its presence in the electric vehicle industry, it remains an intriguing investment opportunity for those seeking growth potential.