What happened
Shares of several U.S.-based electric vehicle (EV) companies are moving higher today and investors can probably thank Rivian Automotive (RIVN -2.21%) for that. Shares of Rivian jumped as much as 11.2% in early trading today, and that helped the stocks of other EV names, including Lucid Group (LCID 1.19%) and Nikola (NKLA -2.41%), to also move higher by 6% and 6.8%, respectively.
All three stocks cooled down somewhat after the early jumps. As of 12:20 p.m. ET, shares of Rivian, Lucid, and Nikola were holding gains of 8.6%, 1.6%, and 2.2%, respectively. And there was good reason why Rivian remained the strongest of the group.
So what
After the entire EV sector has seen recent stock declines driven by manufacturing and cost headwinds, Rivian CEO RJ Scaringe injected some new confidence with a filing yesterday showing he just bought more than $1 million in his company's stock. Investors often say that there can be many reasons to sell, but there's only one reason why an insider adds to holdings of their company's common stock -- they expect it will move higher.
Image source: Rivian Automotive.
In a note that seems to support Scaringe's thoughts, widely followed Morgan Stanley analyst Adam Jonas just maintained the equivalent of a buy rating on Rivian shares. Though the analyst lowered the stock's price target from $85 to $60 per share, that still represents an increase of more than 140% above Monday's closing price.
Now what
Earlier this year Rivian and Lucid both sharply reduced vehicle production targets for 2022. But both also just maintained those reduced projections when they reported first-quarter results. Rivian had said that even though it had the equipment and processes in place to produce 50,000 of its electric vehicles this year, it only expects to make 25,000 due to parts shortages from supply chain constraints.
In the Morgan Stanley note, Jonas said he doesn't even expect Rivian to hit that target. He believes the company may only produce 15,500 vehicles this year. He has also reduced production estimates for 2023, 2025, and 2030. But based on his price target, he still believes there is plenty of upside for the shares with his more conservative view looking ahead.
Beyond solving near-term supply chain issues, Rivian and Lucid expect to grow production in the next several years with new manufacturing plants being brought online. After the CEO showed he also seems to think that growth will lead to a rising stock price, investors took up several names in the sector today.
