It has been a wild ride for Rivian Automotive investors since the electric vehicle maker went public last month. Things could get even wilder.
Analyst ratings for the company are expected to arrive this week—and if history is a guide, many of the new ratings should help the stock.
But Rivian (ticker: RIVN) isn’t exactly ailing. The company is valued at about $100 billion, more than Ford Motor (F) or General Motors (GM). Still, its shares are down about $2 from where they opened for trading on Nov. 10. Investors who bought shares when Rivian made its Nasdaq debut are down, even though the stock is still significantly higher than its $78 IPO price.
Counting its IPO day, Rivian experienced an incredible five-day winning streak, during which its stock peaked at $170.47. But shares closed down 5.5% on Friday at $104.67 each, while many other highly valued stocks slipped. The Nasdaq Composite and the S&P 500 fell 1.9% and 0.8%, respectively.
While it might seem strange, Rivian stock could use a boost—and Wall Street might oblige. Brokers involved in an IPO have to wait about 25 days to launch coverage of a stock, and they typically give optimistic takes after a business goes public.
Take Uber Technologies (UBER): The ride-hailing company sold shares to the public on May 10, 2019. Seventeen brokers launched coverage on June 4, 2019. Only one of the those brokers launched with a Hold rating—the rest were Buys. Back then, the average analyst target price for Uber stock was about $56. But shares were trading around $43 each, below Uber’s $45 IPO price. Rivian stock, meanwhile, is still 34% higher than its IPO price.
It’s also worth taking a look at two EV producers, XPeng (XPEV) and Li Auto (LI). When the two Chinese companies sold shares to the U.S. public last year, analysts took a positive view even though it took a while to build coverage.
Li Auto’s IPO was first: the company sold shares for $11.50 each on July 30, 2020. Only a few analysts started covering the company in late August of that year after the quiet period wrapped. They all gave Buy ratings, with the average price target predicting $21 a share. Li stock was trading for about $17 at the time.
XPeng’s IPO took place Aug. 27, 2020, when the company sold shares at $15 a piece. Just one analyst initiated coverage on Sept. 21, 2020, J.P. Morgan’s Nick Lai: He gave XPeng’s stock a Buy rating and $27 price target. XPeng stock was trading at about $18 at the time.
It’s still anyone’s guess where analysts will come down on Rivian. It’s richly valued—but so was Uber, which had a roughly $70 billion market capitalization when it went public. GM was worth about $54 billion at the time of Uber’s IPO, while Tesla (TSLA) was worth less than $45 billion.
As for Tesla’s 2010 IPO, the company sold shares at a split adjusted $3.40 each. Just one analyst, Goldman Sachs’ Patrick Archambault, rated Tesla after the quiet period for the stock wrapped. He gave it a Hold rating and a $4.20 price target.
That was a long time ago, and EVs are far more popular now. For Rivian, it wouldn’t be surprising to see more Buy than Hold ratings—and sell Ratings would be very surprising.
Write to Al Root at [email protected]
