What happened
On the first day of trading after a disappointing performance last week, shares of electric vehicle (EV) maker Rivian (RIVN +0.35%) are continuing to plunge. Today's red flag stems from an analyst's bearish outlook.
As of 12:10 p.m. ET, shares of Rivian have fallen 2.3%, a partial recovery from their earlier decline of 6%.
NASDAQ: RIVN
Key Data Points
So what
Pessimistic about the road ahead, Daniel Ives, an analyst at Wedbush, cut his price target on Rivian's stock to $25 from $32. Based on Rivian's price at the beginning of trading this morning, the price target implies upside of about 27%.
This latest bit of news provides more fodder for the bears who are still focusing on the company's news regarding its plan to raise $1.5 billion by issuing debt. While weighing down the balance sheet with $1.5 billion in debt is enough of a reason for investors to be concerned, investors also face shareholder dilution because the debt comes in the form of convertible notes that can be converted into shares of Rivian stock.
Now what
Rivian expects to produce 52,000 vehicles in 2023 -- a notable increase from the 24,337 vehicles that it produced in 2022. The sticking point, however, is that the company isn't profitable, and it needs to rely on external sources to power its main growth project: a new manufacturing facility in Georgia that's expected to have an annual production capacity of 400,000 vehicles.
The lower price target may be disheartening, but the fact that Rivian isn't profitable and requires outside capital isn't a surprise. Consequently, if you were bullish on Rivian yesterday, there's nothing that should change your mind today.
