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Why Rivian Stock Stomped on the Accelerator Today

By Rich Smith – Dec 6, 2021 at 5:33PM

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Wall Street initiated coverage of Rivian, and the applause was thunderous.

What happened

Shares of Rivian Automotive (RIVN 4.53%) surged all day long Monday, finally ending the day with the electric truck stock up 11.6% over Friday's close. It ended the day above $116.

A cavalcade of Wall Street endorsements was the reason.

Person pointing at computer screen while talking on phone.

Image source: Getty Images.

So what

Nearly a dozen separate analysts initiated coverage of Rivian this morning, and as detailed by, nearly every one of them liked the stock, assigning buy, overweight, or outperform ratings.

Only JP Morgan and Wells Fargo assigned more-hesitant neutral ratings to the shares. Surprisingly, with price targets of $104 and $110, respectively, even those two didn't find Rivian stock outrageously priced. And that's despite the fact that at last report, Rivian had only actually sold 156 EVs through the end of October.

The bulls' uniformly positive ratings predicted that despite its dearth of sales, Rivian will continue rising to anywhere from $130 a share (Deutsche Bank) to as high as $170 (Bank of America).

Now what

Does that make sense, or are these analysts being optimistic? Analysts at Wedbush, for example, noted that Rivian's sales won't actually pick up until mass production of the R1T electric pickup truck and R1S electric SUV begins in early 2022. With 48,000 orders for these vehicles in hand, and a 100,000-unit order from Amazon to build electric delivery vans, Wedbush argues that Rivian is sitting in "the catbird's seat" and will begin grabbing significant market share next year.

Indeed, those numbers could even be conservative. Morgan Stanley noted that the 100,000-unit Amazon order is pretty old news, and might be stale -- actually, it says, Rivian might win orders for as many as 300,000 electric delivery vans from Amazon by 2025 or 2026.

With only a few dozen EV sales under its belt today, and most of its potential residing in the far future, it remains to be seen how profitable these sales will be for Rivian. Until we get a better look at the company's eventual profit margins, it's hard to say whether $104, $110, $130, or even $170 is too much or too little to pay for the stock.

But as recently as four years ago, I had my own reservations about Tesla and wondered how much it would be worth if it had only the 3% to 6% operating profit margins common to car companies Ford and General Motors. But last year, Tesla booked profit margins of 6.3%, and over the last 12 months, its operating margin approached 10%.

If Rivian surprises us similarly, its stock could go far.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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