What happened
Rivian Automotive (RIVN +1.90%) stock is tumbling on Friday, trading down 6.4% at noon ET. Competition is heating up for the company, but that's not even why an analyst just trimmed his price target on the electric vehicle (EV) stock for the second time this month.
So what
Mizuho analyst Vijay Rakesh, who cut Rivian's price target to $100 a share from $145 per share in early March, now sees the stock rising to $95 a share. While that still means expected upside potential of more than 100% in the next 12 months, a price cut also reflects more hurdles for Rivian's growth.
Rakesh, in fact, noted the supply constraints facing Rivian and expects the company to deliver fewer vehicles in the first half of the year. He expects production to ramp up later in the year as the macro environment improves.
Image source: Rivian Automotive.
On its part, Rivian delivered only 920 vehicles in 2021 and said it could produce only 1,410 vehicles this year through March 22. For 2022, Rivian expects to produce only 25,000 vehicles against analyst estimates of 40,000 units. The company even said it could have produced 50,000 vehicles this year if not for the supply constraints.
Meanwhile, the other electric pickup truck start-up Nikola (NKLA +0.00%) announced yesterday it has finally started production of its Tre battery-electric commercial truck and expects to start deliveries in the U.S. as early as the second quarter. Nikola expects to deliver 300-500 trucks this year and scale up production from 2023.
Now what
To be sure, the entire auto sector is crumbling under supply pressures. To add to the woes, prices of input like nickel metal have shot through the roof in recent weeks. Popular EV start-up Nio (NIO 1.96%) just said it continues to face challenges including low chip supply, rising raw material costs, COVID-19, and a challenging international environment. Nio also hinted it could reevaluate its pricing in the near future based on the supply and cost situation.
NASDAQ: RIVN
Key Data Points
In other words, Nio may also raise EV prices like Tesla to tackle rising costs, but the thing is, these companies are already selling thousands of EVs every month, unlike Rivian. Rivian, in fact, already announced steep price hikes in early March but had to roll back part of the decision after a backlash that hit its stock price hard. Raw material prices have gone up even higher since, which means Rivian will have to absorb higher costs now.
Investors are weighing all of these risks and more for Rivian and pulling money out of the stock today.
