Rivian stock is at risk for more downgrades going forward
Rivian Automotive (NASDAQ:RIVN) stock is down 5.4% to trade at $11.19 today, after the U.S.-based electric vehicle name was downgraded to "equal-weight" from "overweight" at Morgan Stanley. The analyst in coverage also trimmed its price target to $13 from $16, expressing uncertainty over achieving positive free cash flow in the next five years.
The price-target cut is especially notable, considering RIVN's consensus 12-month price target of $17.68 is a 58% premium from its current perch. And for a stock down 52.3% in 2024, more downgrades could be on the way, considering 13 of the 24 brokerages in coverage still maintain "buy" or better rating, with only one "sell" on the books.
Rivian stock is now trading at its lowest level since June 25, when the stock gapped higher by 23.2% after Volkswagen announced a joint venture and $5 billion investment. Longer term, RIVN is down 50% in the last 12 months.
Options traders are loading up on calls. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Rivian's stock's 10-day call/put volume ratio of 5.10 ranks one percentage point from an annual high. Given a healthy 16% of the equity's total available float is sold short, its possible some of this rampant call activity could be shorts seeking an options hedge against any unexpected upside.
Options are an intriguing route, per RIVN's Schaeffer's Volatility Scorecard (SVS) that sits up at 81. This indicates the security has exceeded options traders' volatility expectations over the past year, a boon for premium buyers.