Shares of electric vehicles manufacturer Rivian Automotive (RIVN 6.10%) got a 3.8% jump-start on Friday through 10:55 a.m. ET. You can thank investment banker Piper Sandler for that.
Last night, after close of trading on a day when Rivian stock got clobbered for an 8% loss, Piper Sandler stepped in to save the day -- upgrading Rivian stock to an overweight rating and upping its price target on the EV stock to $21 per share.
What the Wall Street analyst said
StreetInsider.com covered this story last night. As the ratings-watcher described, Piper Sandler rehashed most of the arguments in favor of Rivian stock that other analysts laid out last week: Rivian has a new electric SUV in the works -- the R2 -- and surprised investors by announcing a second new vehicle, the R3 electric hatchback, to arrive after that. Sixty-eight thousand buyers have already pre-ordered the new R2, which, at $45,000 a pop, costs a lot less than Rivian's existing R1T or R1S.
Rivian will first build the R2 at its Normal, Illinois, plant, saving a few billion dollars by postponing construction of a new plant in Georgia. This will also accelerate R2's introduction by about six months.
Best of all, Rivian stock has sold off by about 20% over the past few days. Piper considers its new share price a bargain and feels "compelled" to upgrade the stock.
Is Rivian stock a buy?
But should you feel compelled to buy Rivian stock? That's the real question. And despite Piper's optimism, I'm not sure you should.
Rivian may not be spending as much on capital expenditures now as investors feared it would. It's still burning nearly $6 billion a year, however, and has only $9.4 billion cash in the bank (and $4.9 billion in debt). Its R2 electric SUV, meanwhile, won't arrive and begin generating cash for another two years. Chances are that Rivian will run out of cash before then and need to create and sell new shares to bridge the gap.
The stock remains risky, and Piper's $21 price target looks overoptimistic to me.
