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Why Rivian Stock Dropped Again Today

By Rich Smith - Jan 13, 2022 at 1:48PM

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Are this week's buyers experiencing buyer's remorse?

What happened

Pity investors in electric truck start-up Rivian (RIVN -4.45%) stock. No sooner had Rivian recovered (on Wednesday) from the sell-off it suffered when its chief operating officer was reported to have left the company Monday than Rivian promptly sold off again -- Thursday morning.

As of 12:45 p.m. ET, Rivian stock is down 5.1%.

Red down arrow on a black backdrop of tickertape prices.

Image source: Getty Images.

So what

So what caused Rivian's rally to stall out this time?

That's hard to say. There's no actual news today to explain why Rivian stock might be falling. Instead, what we may be seeing here is a case of buyer's remorse, as investors who bought Rivian stock earlier in the week on the basis of a recommendation from Britain's Redburn Research (reported by begin to rethink that decision.

Now what

Redburn initiated coverage of Rivian stock with a buy recommendation and a $141 price target that implied Rivian stock might gain as much as 70% this year off of its current $83 stock price.  

That sounds pretty bullish for a start. "Rivian beat TeslaFord and GM to market with the first electric pickup," explained Redburn. Not only that, but "we believe demand will vastly outstrip Rivian's ability to produce," said the analyst -- suggesting that Rivian's first-mover advantage in electric pickups will be hard to overcome. That being said, Redburn wasn't without reservations about Rivian stock.

For one thing, Redburn noted that "there is considerable operational and financial risk" when investing in an "early stage" manufacturer like Rivian. (Indeed, the analyst later called this risk "huge"), and worried particularly about "the rate of production expansion" that Rivian can achieve. Viewed in that light, even the analyst's exultation that "demand will vastly outstrip Rivian's ability to produce" takes on a different tone. If Rivian can't keep up with demand, it might disappoint buyers with production delays. (In fact, you could even say Rivian has already disappointed some buyers in this regard).

Although Redburn calls Rivian "particularly well capitalized and ... in a good position to fund the growth necessary to reach its point of cash flow breakeven," cash alone might not be enough. Rivian also needs to prove it can execute on growing production, and handling the logistics necessary to become a 750,000-vehicles-a-year operation (by 2027) if it's to fulfill its full potential.

Whether Rivian can get that job done remains to be seen.

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