Wall Street’s enthusiasm for Rivian Automotive Inc., last year’s electric-vehicle startup darling, is already diminishing, with the business losing around $117 billion in market value in only four months. Analysts are lowering their expectations for this once-hyped company ahead of Rivian’s fourth-quarter earnings, which are scheduled to be released after the market close on Thursday.
According to statistics, at least four analysts have reduced their price estimates by an average of 40% this month. The cuts come amid fears that the conflict in Ukraine may compound the severe supply-chain issues that plagued the auto industry last year.
“With investors growing increasingly concerned about Rivian’s production ramp, as well as its failure to battle cost inflation with price hikes, we have reduced our price objective to $47 from $115,” Barclays analyst Brian Johnson wrote in a client note on March 8. Johnson’s hold equivalent rating on the shares remained unchanged.
The electric-truck manufacturer’s initial public offering in November coincided with increased investor interest in all things EV, propelling its market valuation to $153 billion a few weeks later. Only four months later, that valuation has fallen to around $36 billion, as the market has soured on growth companies due to fears about increasing inflation and an imminent tightening of monetary policy, not to mention rising dangers to the automotive supply chain.
Given the growing costs of battery raw materials such as lithium and nickel, these sector-wide headwinds are sure to weigh severely on emerging EV startups. However, Rivian’s difficulties extend far further, as evidenced by the company’s recent reversal on a decision about the price of its trucks.
Rivian announced on March 1 that it would hike retail prices on its premiere vehicles due to “exceptional” supply-chain bottlenecks. Then, two days later, it backtracked due to client cancellations. This did not go down well with investors, who drove the stock down 32% in five trading sessions.
Nonetheless, the average analyst price objective for Rivian is around $116, with 11 analysts suggesting a buy, four recommending a hold, and only one advocating a sell. The reason for this is that, despite its flaws, Rivian is still seen as the best-positioned startup to compete with Tesla Inc. in the fast-expanding EV industry.
Wedbush analyst Daniel Ives, who last wrote a note on the firm on December 17 following the third-quarter results, is waiting for the company’s 2022 production target before updating his model. According to him, Rivian’s “fair value is now contingent on its Street credibility.”
