Rivian's Stock is a Bullish 'Fresh Pick' Ahead of Tesla's Deliveries Data

Baird analyst Ben Kallo has identified Rivian Automotive Inc.'s stock as a "fresh pick" with a bullish outlook in anticipation of the electric vehicle manufacturer's forthcoming delivery report. Kallo anticipates that Rivian's report will surpass Wall Street's expectations.

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While expressing bullish sentiments towards Tesla Inc. (TSLA, +0.22%), categorizing it as a "top pick" for the latter half of 2023, Kallo's projection for Tesla's third-quarter deliveries of 439,200 units falls slightly short of the current FactSet consensus, which stands at 462,000.

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In premarket trading, Rivian's shares (RIVN, +5.42%) experienced a 0.8% increase, while Tesla's stock registered a 0.6% decline.

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Kallo acknowledged that concerns about weakening demand for Rivian have recently impacted the stock's performance. Notably, the stock witnessed a 7.0% decline in September following a substantial 17.8% drop in August. This decrease followed a remarkable three-month surge, during which the stock more than doubled, demonstrating a 116% increase.

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Kallo believes that despite these fluctuations, there remains robust underlying demand, particularly for the R1S electric sport-utility vehicle, with production showing signs of improvement.

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He stated, "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."

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Rivian is scheduled to release its production and delivery data around October 3rd, with the FactSet consensus estimating deliveries at 14,000 units.

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Kallo reiterated his outperform rating for Rivian's stock and maintained a price target of $30, implying a 42% upside from the closing price of $21.13 on Monday.

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Kallo also noted that there is "confusion" among Wall Street analysts regarding third-quarter deliveries due to the company's planned factory downtime and questions regarding demand following price reductions. While FactSet's "consensus" delivery estimate for the third quarter stands at 462,000 electric vehicles, the lack of clarity has led to a wide range of estimates, ranging from a low of 438,000 to a high of 511,000.

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

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Regarding Tesla's refreshed Model 3, Kallo cited positive early reviews and strong demand, particularly in China, although deliveries are scheduled for early in the fourth quarter.

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Year to date, Rivian's stock has risen by 14.7%, while Tesla's stock has surged by 100.5%. In comparison, the S&P 500 index (SPX) has gained 13% during the same period.

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