Why Rivian Stock Surged in Early Trading Today

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The Motley Fool

What happened

Shares of electric vehicle maker Rivian Automotive (NASDAQ: RIVN) opened higher on Wednesday. After two days of volatile trading, investors and traders appeared to be in a more upbeat mood while awaiting the results of the Federal Open Market Committee's (FOMC) meeting.

Rivian's shares were up as much as 8% in early trading before settling back a bit. As of 10:30 a.m. ET, the company's shares were still up about 3% from Tuesday's closing price.

So what

It has been a wild week for shares of early-stage growth companies, including those of Rivian and other electric vehicle makers. Investors have been worried about the potential impact of higher interest rates, with good reason: With inflation at levels not seen in decades, it seems all but certain that the FOMC will decide to raise rates this year, perhaps as soon as March.

The FOMC has been meeting since Tuesday morning; Federal Reserve chairman Jerome Powell is expected to offer some guidance on the committee's plans after the meeting concludes on Wednesday afternoon.

Rivian is working to ramp up production of its R1T electric pickup and the closely related R1S SUV. Image source: Rivian Automotive.

As for Rivian, Wall Street isn't abandoning ship. But some analysts are rethinking their financial models in anticipation of higher rates. In a new note on Wednesday, J.P. Morgan analyst Ryan Brinkman maintained his bank's neutral rating on Rivian, but cut its price target to $84 from $104 after factoring in the effects of a higher discount rate on the company's likely growth.

For what it's worth, Brinkman made clear that the company's 2021 deliveries miss had no impact on his valuation. (And rightly so, I say. That "miss" triggered a big sell-off, but it was more about communications than about any change in Rivian's fundamentals or investment case.)

Now what

Electric vehicle investors can look forward to more details on Rivian's 2021 results and 2022 production ramp-up plan when it reports its fourth-quarter results, likely in the second half of February.

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