Rivian's Stock Is a Bullish "Fresh Pick" Ahead of Deliveries Data, Tesla's Not so Much

Rivian Automotive Inc.'s stock was designated Tuesday as a bullish "fresh pick" by Baird analyst Ben Kallo ahead of the electric-vehicle maker's deliveries report due out next week, which he believes will beat Wall Street forecasts.

While Kallo was also bullish on EV giant Tesla Inc.'s stock $(TSLA)$, and considered it a "top pick" for the second half of 2023, his forecast for third-quarter deliveries of 439,200 fell below the current FactSet consensus of 462,000.

Shares of Rivian $(RIVN)$ rose 0.8% in premarket trading, while Tesla's stock slipped 0.6%.

Kallo said concerns over reports of weakening Rivian demand have recently hurt the stock, which has lost 7.0% so far in September after tumbling 17.8% in August. That selloff followed a three-month surge in which the stock more than doubled (up 116%).

Instead, Kallo said, he believes underlying demand remains strong, particularly for the R1S electric sport-utility vehicle, with production improving.

"We see [third-quarter] deliveries as a near-term catalyst and expect sentiment to improve as [Rivian] continues to realize cost benefits from an improving supply chain and the use of in-house components," Kallo wrote.

Rivian is expected to report production and deliveries data on or about Oct. 3, with the FactSet consensus for deliveries at 14,000.

Kallo reiterated his outperform rating on Rivian's stock and his $30 price target, which implies 42% upside from Monday's closing price of $21.13.

Kallo said that there is "confusion" among Wall Street analysts regarding third-quarter deliveries based on the company's planned factory downtime, as well as questions regarding demand following price cuts.

While FactSet's latest "consensus" deliveries estimate for the third quarter is 462,000 EVs, that confusion has led to a wide range of estimates, from a low of 438,000 to a high of 511,000.

Kallo's delivery estimate of 439,200 implies about a 28% increase from a year ago but a 6% decline from the second quarter.

Regarding Tesla's refreshed Model 3, Kallo said early reviews have been positive and wait times suggest demand has been strong, particularly in China. However, deliveries are scheduled for early in the fourth quarter.

Rivian's stock has rallied 14.7% year to date while Tesla's stock has rocketed 100.5%. The S&P 500 index SPX has gained 13% this year.