In contrast to the segment leader, Tesla (NASDAQ:TSLA), EV maker Rivian’s (NASDAQ:RIVN) exceeded expectations in Q3 deliveries. The company seems to have resolved many of the production and operational issues that have plagued it since going public in late 2021.
However, last week, Rivian released disappointing Q3 preliminary results. These results showed that revenue is expected to fall below the Street’s forecast, coming in at $1.31 billion, which represents a $70 million miss. But what particularly caught investors’ attention and proved highly unpopular was the company’s announcement of a $1.5 billion convertible note offering.
Shares took an unprecedented ~23% nosedive in a single session as a result, the biggest one-day drop in its history.
The announcement also has Wedbush analyst Dan Ives scratching his head and not for the first time.
“Rivian has been a painfully agonizing story for the bulls as on one hand the demand story has been robust for its EV vehicles while being overshadowed by continued execution/messaging missteps since its IPO in November 2021,” says the 5-star analyst. “While we fully get the capital needs down the road for Rivian as it ramps production/deliveries over the coming years the Street’s low confidence in this management team around investor messaging and execution is a major problem for the stock and remains a huge overhang.”
It’s a “one step forward, two steps back” theme with the company moving in the right direction from a production point of view but at the same time management “continues to stumble with head scratching strategic/investment moves again and again with this latest convert move along those lines.”
Although Ives stays bullish on Rivian’s growth prospects and thinks the company can still emerge as one of the “long-term winners in this EV arms race,” his confidence in the narrative has “taken a clear hit.”
As such, while Ives maintained an Outperform (i.e., Buy) rating on the shares, he lowered the price target from $32 to $25. Nevertheless, there’s still potential upside of 33% from current levels. (To watch Ives’ track record, click here)
Elsewhere on the Street, based on an additional 12 Buys and 7 Holds, the stock claims a Moderate Buy consensus rating. Analysts seem to the think the shares are now quite undervalued; the average target stands at $29.05, suggesting the stock will gain ~55% in the months ahead. (See Rivian stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
