What happened
At a time of high, and rising, oil prices, electric vehicle (EV) stocks would seemingly become more interesting to investors. But a series of missteps has driven the shares of Rivian Automotive (RIVN 9.11%) to all-time lows recently. Today, shares plunged again, dropping more than 6% at the market open. But investors continue to weigh the various dynamics of the sector, and the stock rebounded sharply before settling back to a gain of 2.2% as of 10:56 a.m. ET.
So what
The initial drop came after Barclays analyst Brian Johnson slashed his price target for the EV start-up by more than half, from $115 to $47 per share, as reported by Thefly.com.
The stock then rebounded as geopolitical uncertainty continues to push oil prices higher. That will result in higher gasoline prices, which consumers are already seeing. Demand for electric cars will likely increase more quickly if gasoline prices remain at high levels, helping to explain the bullish reversal in Rivian.
Image source: Rivian Automotive.
Now what
Johnson cited Rivian's recent backpedaling on a vehicle price increase the company announced last week. Customers already holding reservations reacted strongly with complaints and cancellations when Rivian said it would set new prices for its R1T and R1S even for those with existing orders. The company then backtracked and apologized, resetting the pricing to the original levels.
While that may have satisfied customers, it means Rivian will have to absorb sharply rising component and materials prices. Johnson noted margins will be hit, resulting in his new price target. With the stock closing yesterday's session at around $42 per share, the analyst still kept his rating on Rivian at equal weight, which is effectively a neutral rating.
