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Rivian receives positive ratings in initial Wall Street coverage

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Yahoo Finance Live anchors examine Rivian's positive ratings from Wall Street investment firms based on the EV manufacturer's public opening and outlook.

Video transcript

JULIE HYMAN: And then finally, we got a hat trick of EV companies this morning, because we've got to talk about Rivian. Whenever a company becomes public, there tends to be a little bit of a pause period. And then a lot of an analyst initiations come through from the companies whose employers helped underwrite the IPO. So then there's a sort of a-- that quiet period afterwards.

A lot of positive sentiment on Rivian this morning, which is perhaps not shocking, right? One of those that stands out to me, though, JPMorgan actually rating it a neutral. And valuation is the reason, which makes sense, given what we've seen this stock do thus far, Soz. You know, valuation sort of makes sense. But there are still a lot of outperforms on the thing.

BRIAN SOZZI: Yeah, that valuation doesn't matter. Rivian hasn't made any cars yet for the most part, and not making any money any time soon. Let's just slap buy ratings on it. I will note, Rivian shares down 40% from the high hit on November 16. So the stock has been pulling back, as you would expect from an unproven company in a broader market that is under a lot of pressure here.

I'm looking at the note out of Deutsche Bank. They are initiating with a buy rating, $130 price target. Just another investment bank calling attention to Rivian's tie-up with Amazon. Amazon, I believe, owns 20% of the company. They have contracted with Rivian to get them 100,000 electric vehicles by 2024. That investment seen as a backstop to the stock price.

BRIAN CHEUNG: Yeah, and all these represent, by the way, all these price targets for the most part represent upside potential from where the stock is trading currently at about 101 bucks. But of course, that is all after the precipitous drop that we have seen in Rivian shares after Ford said they were not going to work together.

Now of course, on one hand that argues that, while the traditional OEMs maybe don't have enough faith in what Rivian is trying to do, but on the other hand, maybe that gives them the space to try to grow whatever they want without the shackles of whatever the production capacities, or whatever it was that Ford wanted to do. You might have those deviating kind of interests that no longer are a factor.

But look, when it comes to what Wall Street is trying to do in trying to figure out what a proper price target is for this company, which again, has not been public for very long, the question is really going to be, how do you provide any sort of financial modeling within a company that had a billion dollars, with a B, a billion dollars in losses in 2020, what's the use of using a discounted cash flow model and backing that into a weighted average cost of capital, right? You cannot do that with this type of company.

But for that matter, I guess you can't do that with many of the other unicorns that are going public in this day and age. So I guess it just goes to show that these types of initial price targets might be a little bit more speculative and kind of not as substantial as we might expect to see in previous launches of coverage for other types of companies, let's say, in the 2010s. But again, maybe that's just the era that we live in today.

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