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Rivian: No Pain, No Gain

Rivian (RIVN) stock quickly grabbed the headlines following its November IPO; shares surged out the gate but have since retreated by 50% from the early highs.

For those investors who thought the EV startup was well-positioned and connected to ride off into the sunset with the EV spoils in the trunk, Morgan Stanley’s Adam Jonas would like a word.

“Rivian investors need to keep near term expectations managed,” said the 5-star analyst. “To Rivian investors thinking that the road to 1 million units of annual EV sales will be up and to the right and devoid of negative headlines… we say, think again.”

Last week’s news that Amazon was partnering Stellantis – the owner of 18 car brands, including Vauxhall and Alfa Romeo – to work on EVs together rocked Rivian investors, who might have thought Amazon was theirs to claim, at least where EV partnerships are concerned. Pouring cold water on any notion the news headline is as “negative as it gets for Rivian this year,” Jonas says, if you believe that to be the case, then “this is probably not the stock for you.”

Leaving aside the fact Rivian’s Amazon deal demands exclusivity on Rivian’s part only – i.e., without Amazon’s right of first refusal, Rivian cannot sell EDVs to other fleet operators through 2025 though Amazon is not obliged to stick only with Rivian – it’s going to be a long, painful, bumpy ride to fulfill its undoubtful potential.

“Rivian will need to scale from ~tens of vehicles per week today to many hundreds and then thousands of vehicles per week,” notes Jonas, before adding, “And there will be problems.”

Look no further than Tesla for evidence. The EV leader had a baptism by fire in its attempts to scale EV manufacturing. The disasters have run the gamut from “fires, quality issues, battery fires, software glitches, delays, scathing articles and videos and other accoutrements…”

Yes, it is extremely hard for an EV maker to scale. “You can’t have the reward without the pain,” says Jonas. And pain is mostly what the analyst expects. Addressing investors, Jonas says “Our message to you on Rivian volume for FY22 is that we expect the risks to supply to far outweigh the risks to demand. We are confident Rivian will sell every vehicle they can make… if they can make them.”

It might not sound like it, but bottom-line, Jonas is a fully-fledged Rivian bull, “excited about the product,” and recommending investors make use of the buying opportunity represented by the pullback.

Accordingly, Jonas rates Rivian an Overweight (i.e. Buy) and has a $147 price target for the shares. Investors could be sitting on gains of 76%, should Jonas’ forecast play out as anticipated. (To watch Jonas’s track record, click here)

The Street’s average target is a more modest $134.64, yet that figure still represents possible gains of 61%. Overall, the stock’s Moderate Buy consensus rating is based 11 Buys vs. 4 Holds. (See Rivian stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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