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Why Rivian Automotive Stock Popped Today

Motley Fool - Tue Oct 10, 2023

What happened

Shares of Rivian Automotive(NASDAQ: RIVN) popped this morning, rebounding from a decline that began last week. After gaining as much as 6.4%, the stock of the electric vehicle (EV) maker was higher by 5% around 12:30 p.m. ET.

So what

After pleasing investors last week with third-quarter vehicle production and delivery results, Rivian surprised many investors and analysts a couple of days later by announcing it was raising $1.5 billion in a convertible bond sale.

Today, one of those analysts decided that the stock's decline after news of that capital raise had brought a good opportunity to buy Rivian shares. UBS analyst Joseph Spak upgraded his firm's rating on Rivian from a hold recommendation to a buy. He did also cut his price target by $2 to $24 per share. But that still would represent a gain of 28% from yesterday's closing price.

Now what

Spak believes that Rivian is on track to ramp up vehicle production at a faster pace than the company has guided for so far. Management reiterated that it continues to expect to produce 52,000 EVs this year when it released its third-quarter data. But Spak thinks the company will surpass that estimate and be able to manufacture 55,000 in 2023.

While that's still not a level of production and sales that would bring the company to profitability, it would be more than twice what Rivian produced in 2022. That would be a positive step toward profitability. And the added capital recently raised will now help bolster the company's balance sheet.

Spak's upgrade makes sense. As Rivian continues to grow production and sales, it has plans to construct a second factory to launch its lower-priced vehicle platform over the next several years. As long as demand remains strong, and Rivian executes well, the stock could move higher as the second factory gets closer to production.

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Howard Smith has positions in Rivian Automotive. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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