Many investors are well aware that there’s a very bearish environment building for most EV stocks in the market right now. Rivian (NASDAQ:RIVN) has certainly participated in this year’s decline, with RIVN stock dropping nearly 60% since the start of the year, outpacing most of its larger-cap peers.
Today, RIVN stock is seeing even more downside, dropping another 2% on news of a key analyst price target cut. Barclays cut its price target on Rivian from $12 to $10 per share, citing a range of competitive pressures, capital constraints and trade-offs the company has made, including with respect to progress on the company’s Georgia facility.
These headwinds are well-known among Rivian investors. But let’s dive deeper into what analysts are saying about the stock to try to gain some perspective on where it may be headed.
RIVN Stock Declines Again on Price Target Cut
It’s worth noting that despite a 20% price target cut, Barclays analysts still believe the stock could have roughly 15% upside from current levels. Some context is always important, and this is a company that will likely see some accumulation build when investors think this selloff is overdone.
Unfortunately, negative catalysts continue to pile up for Rivian. The company’s capital constraints tied to its production ramp-up could soften its path to volume growth, according to analysts. Additionally, the company’s strategic shift to start production of its R2 model at Rivian’s Normal plant but also postpone the construction of its Georgia plant suggests capital could be more scarce than previously thought.
Concerns around the potential for capital raises have equity investors on their toes. If the company issues shares, dilution will likely provide a headwind for capital appreciation. And any more debt added on at current levels would certainly impact the company’s path to profitability.
So, Rivian needs to spend to ramp up production, but it’s limited in how much it can spend right now. Until we see a more accommodating monetary policy stance (and it’s increasingly looking like higher-for-longer is here), Rivian could be in trouble. That’s what the market (and analysts) appear to be saying right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
