Shares of Rivian Automotive Inc. took a dive Monday, in the wake of the electric-vehicle maker’s recall of nearly all of its vehicles, but Wedbush analyst Dan Ives said the news is just a “speed bump” that doesn’t derail the bullish outlook.
That said, Ives acknowledged that the recall for a steering safety issue is a “black eye for Rivian,” and comes at a time that the company is just starting to hit its stride on reaching its 25,000-EV production target for the year.
The company RIVN, -7.64% said after Friday’s closing bell that it plans to recall about 13,000 vehicles to fix improperly installed fasteners that could cause drivers to lose steering control, with The Wall Street Journal observing that represented “nearly all” of the company’s vehicles.
The stock sank 6.5% in premarket trading Monday, after falling 7.6% on Friday before the recall news surfaced.
“The last thing any Rivian investor wants to see in a shaky market is a broad recall that hurts the brand and gives some lingering credibility issues to production going forward,” Wedbush’s Ives wrote in a note to clients.
He said that while larger auto makers often have recalls, Rivian is under a “bright spotlight” as it is still in “prove me” mode with investors. The WSJ report noted that the recall was Rivian’s third since production began last year.
Nevertheless, Ives reiterated the outperform rating he’s had on the stock since December, which was about a month after Rivian went public. He also kept his price target at $ 45, which implied about 33% upside from Friday’s closing price of $ 33.95.
Ives said the recall is a “speed bump” in Rivian’s growth story, but he doesn’t believe it will keep the company from meeting its 2022 production or delivery goals. That’s of course unless another shoe drops, Ives said.
The stock has gained 6.1% over the past three months but has plunged 67.3% year to date through Friday, while the S&P 500 index SPX, -2.80% has lost 6.7% the past three months and dropped 23.6% this year.