Like the electric vehicle (EV) sector it's a part of, Rivian Automotive (NASDAQ: RIVN) has been quite stop-and-start this year. One analyst feels this has left the pickup and SUV maker undervalued, even though he recently enacted a slight cut to his price target on the shares. Read on to find out why this pundit is still a Rivian bull.
Still bullish despite the price target cut
Last week, George Gianarikas of Canaccord Genuity shaved $2 per share off his fair value assessment of Rivian stock, for a new level of $28 per share. He maintained his buy recommendation despite the reduction, as even at that lower target the EV manufacturer still has the potential to leap nearly threefold in price.
Not coincidentally, Gianarikas's latest research note on the company came on the heels of the release of its latest production and delivery figures. The most attention-grabbing piece of news in that communication was a disruption in production during the third quarter. This was due to the shortage of a component used in its R1 and RCV platforms, and Rivian said the problem "has become more acute in recent weeks and continues." This led management to cut its estimate for full-year 2024 production.
While Gianarikas acknowledged the pain of the component shortage, he took a big-picture view of the company's future. Of that, he wrote, "We think Rivian has wonderful products that are highly differentiated and compelling; we just look forward to the day when nettlesome production snags are a thing of the past."
Vulnerable and unprofitable
Supply challenges have always existed in the auto industry, and they always will. The problem with Rivian is that it does not have the size, scale, or financial resources that many sector incumbents do, so it is notably more vulnerable to such problems.
Gianarikas makes a valid point about the company's quality product lineup, however the popularity of EVs has faded and Rivian continues to post bottom-line numbers that are well in the red. I would advise caution on this stock.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
