Rivian Automotive Inc.’s stock rallied more than 5% Tuesday after it got a buy rating from analysts at UBS, who said that the road ahead for the electric-vehicle maker “looks brighter” on improving production and other fundamentals.
The analysts, led by Joseph Spak, also lowered their price target on the stock to $24 from $26, which represents a 4% upside over Tuesday prices. UBS previously had the equivalent of a hold rating on the stock.
Rivian caught investors by surprise last week, launching a dilutive $1.5 billion convertible debt offering, sending the stock more than 20% lower and garnering criticism along the way.
The UBS analysts, however, said that with the raise out of the way, investors can “refocus on the improving fundamentals.”
They forecast Rivian to produce about 54,500 EVs this year, compared with the company’s guidance of 52,000. The company could officially announce the improved guidance when it updates the market on its third-quarter results in early November.
See also: Rivian’s stock pays the price as timing of debt offering rattles investors — as does EV maker’s cash burn
“The need for [management] to be clear on messaging and for the company to execute remains critical,” the analysts said in their note.
The analysts also highlighted what they called two recent tailwinds for Rivian, which is slated to introduce a cheaper EV by 2026. Legacy automakers appear to be “pushing back” on EV goals, which “could create a larger need for regulatory credits,” an upside not previously in the books for Rivian, they said.
And, with news that workers at EV battery plants might unionize, Rivian “could have a labor-cost advantage as it scales its Georgia facility,” UBS said.
The United Auto Workers union, which has led strikes at several Ford Motor Co.
F,
General Motors Co.
GM,
and Stellantis
STLA,
facilities since Sept. 14, said last week it has won a “transformative” concession at GM relating to unionizing workers at EV battery plants.
Shares of Rivian have gained 6% year to date, compared with an advance of about 14% for the S&P 500 index
SPX.
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