Investors in Rivian car industry (NASDAQ: RIVN) received some rare good news on Tuesday. After falling for four straight days – including a sharp drop yesterday on news – the electric car market has gotten so bad Tesla (NASDAQ: TSLA) must lay off 10% of its employees – Rivian shares are up 4.3% through noon ET today.
One bank says Rivian is no longer a retail product
Until yesterday, investment bank UBS had pegged Rivian stock with a sell rating and a $9 price target. Today, UBS still thinks it’s worth just $9 per share, a far cry from the $130-plus the stock fetched around its IPO. But the bank no longer thinks it’s a sale.
Last night, UBS upgraded Rivian to neutral as the stock approaches its price target. “The share price now better reflects some of our medium-term concerns,” the bank said.
UBS now believes that $9 is the right price if Rivian only has $4.5 billion in sales next year. If the electric vehicle (EV) company can reach $5.1 billion in sales (as the bank predicts), the stock could even rise. And all the money from pre-orders for the upcoming electric SUV R2 can contribute to this.
Of perhaps more interest to investors, UBS said short interest in Rivian shares has grown to 18.7%, making it increasingly risky to go short (or even maintain a sell rating). Should the EV maker post good news in its next earnings report, or even promise good news in its guidance, traders could decide to start covering their shorts, buying back Rivian shares and pushing the price even higher.
In short, what UBS really seems concerned about here is a short squeeze. In the long run, it’s probably still not a good idea to invest in a money-losing EV company like Rivian. But in the short term, cutting it short can be an even worse idea.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Tesla. The Motley Fool has a disclosure policy.
Why Rivian Stock Bounced Back on Tuesday was originally published by The Motley Fool
