Shares of Rivian (NASDAQ: RIVN) are down more than 20% following the announcement of a debt-offering and 30% from the 2023 high, providing the most attractive entry into this stock since early summer. There are reasons for the market to be down, but the move is overblown, amplified by short-selling, and driven by little more than sentiment. A look at the details suggests nothing has changed fundamentally for the market, only that investors are letting fear get the better of them. Because the company is ramping up production, growing revenue at a hyper-growth pace, and on track to profitability, it looks like now is an excellent time to load up on a few more shares.
Rivian Prices $1.5 Billion Green Debt Offering; Market Overreacts
Rivian announced the offering of up to $1.7225 in green debt, which is no surprise. The analysts and the market expected the company to need additional financing due to the cash-intensive needs of vehicle production ramps and scaling. The notes are convertible and may lead to dilution, but that has been more than priced into the market.
The $1.5 billion is nearly 3X the market cap RIVN stock lost following the news, and dilution is far from certain. The company has until 2030 to pay back the debt and may be able to do so sooner than planned. Profitability is expected in the CY 2027 time frame. The biggest concern from analysts is the company’s delivery of the news; Dan Ives of Wedbush thinks execution and investor confidence are major problems for the stock.
Rivian On Track to Hit Production Goals
Rivian announced producing more than 16,000 vehicles in Q3 and delivering 15,564, slightly more than the analysts had expected. This news was accompanied by reiterated guidance for FY production of 52,000 vehicles, which poses a small problem for the market. The 52K production guidance is below the market expectation and helped to lower the stock price. The caveats are that guidance may be cautious, ISI Evercore thinks so, and production ramp is still underway. Among the latest updates is the onset of production of the MAX battery pack. The MAX pack is for dual-engine R1S and R1T models; initial deliveries are expected this year.
The UAW Strike is an Opportunity for Rivian
Analysts at Morgan Stanley rate the stock at Outperform and see the UAW strike as a potential catalyst for the market. In their view, the major OEMs will at least be scaling back on their EV plans and may make serious shifts. In this environment, the smaller EV manufacturers like Rivian, which are in production and gaining traction, stand to gain market share. The problem for the UAW is the shift to EV coincides with the AI boom and the 4th industrial revolution. The OEMs see it as a way to trim costs and reduce labor, while the UAW is opposed.
The Analysts Still Like Rivian; They Aren’t Selling
Wedbush Dan Ives trimmed his price target for RIVN on the debt offering news but still sees the stock moving up to the $25 range (rated outperform). That is below the current consensus but not enough to end the uptrend in estimates. The Marketbeat consensus assumes about 55% of upside for this stock, Mr. Ives about 30%, and some analysts see the market moving into the $35 to $45 range. Evercore ISI upgraded the stock to Outperform from In-Line with a target of $35 in early October, citing market share gains and outperformance potential.
The Technical Outlook: Rivian Retreats to Critical Support
The price action in Rivian shifted into high gear in late June and surged to the 2023 highs on ramping production and outperformance. Now, the market is returning to critical support levels where it appears to confirm a major reversal. Assuming the market can sustain support at the $18 level, it should begin to rebound soon and may advance to retest the recent highs by the end of the year. The next visible catalyst is the FQ3 results, due in early November.
