Rivian Just Earned a Buy Rating. Is Wall Street Seeing a Turning Point?

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On Nov. 2, UBS analyst Joseph Spak upgraded Rivian from neutral to buy while keeping his $17 price target unchanged. Analysts at UBS viewed the stock's roughly 19% decline over…

Rivian Automotive (NASDAQ:RIVN) shareholders probably wouldn't mind a little encouragement from Wall Street. But a buy rating alone doesn't pay the bills, fix a production bottleneck, or convince somebody to buy an electric vehicle (EV).

What makes this upgrade interesting is the reasoning behind it. UBS sees a disconnect between Rivian's beaten-down stock and the opportunity taking shape around its highly anticipated R2. For investors, the question is whether that disconnect represents an opportunity – or whether the market has good reasons to remain skeptical.

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On Nov. 2, UBS analyst Joseph Spak upgraded Rivian from neutral to buy while keeping his $17 price target unchanged. Analysts at UBS viewed the stock's roughly 19% decline over the preceding month as a buying opportunity ahead of an expected improvement in R2 production and automotive gross margins.

It's fair to say that Rivian has worked through two quarters of upfront launch costs, which have weighed on margins, and the EV maker added a second shift near the end of the third quarter while targeting a third production shift sometime next year.

Rewinding a moment, UBS' unchanged target is worth thinking about. UBS didn't need a bigger estimate of Rivian's value to become more enthusiastic. Essentially, a lower share price made the existing opportunity more appealing, suggesting Rivian is undervalued in the analysts' view.

Or to use a corny auto analogy: Think of a vehicle you've been eyeing finally getting a price cut. The discount matters – but you still need to look under the hood before celebrating a bargain.

Rivian delivered 19,248 vehicles in the third quarter, up 46% year over year.

UBS also described initial R2 demand as solid, suggesting…

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