What happened
Heading for the exit ramp yesterday, investors eagerly clicked the sell button on shares of Rivian (RIVN 2.44%) after learning of the company's massive recall. Today, however, a contrarian opinion from Wall Street is motivating investors to park the electric vehicle stock in their portfolios.
As of 12:02 p.m. ET, shares of Rivian are up 4.7%.
So what
While many found news of Rivian's recall disconcerting, an analyst's commentary is encouraging investors to hitch a ride with the EV manufacturer. Having consulted with Rivian's management, Vijay Rakesh, an analyst at Mizuho, believes that the doubt that echoed through the market yesterday is overdone and that the recall is not ruinous for the company's prospects.
According to Thefly.com, Rakesh characterizes the recall as "relatively minor." Providing evidence for his claim that the impact of the recall will not be catastrophic, Rakesh estimates that Rivian has identified the cause of the recall -- a loose fastener that could affect steering -- on "less than 1%" of vehicles.
Rakesh maintains a buy rating on Rivian's stock and a $65 price target. As of yesterday's closing price of $31.48, the price target represents upside of 106%.
Now what
Offering a contrarian opinion to those who opined yesterday that Rivian is doomed, Rakesh is providing solace to investors who believe the recall is merely a bump in the road in the company's development. Of course, there's no way to know for sure how the company will fare, but it's reasonable to believe that yesterday's sell-off was an overreaction.
With growth stocks such as Rivian, sharp sell-offs after companies report encountering challenges are common; nonetheless, potential investors should recognize the related risks of an investment and dig in deeper before picking up shares.
