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Equities

Rivian Drops 4%, Datadog to Surge 24%: Analysts' View

Analysts cautious on Rivian with a Neutral rating, while Datadog gets a bullish 24% upside target from Baird amidst mixed corporate earnings.

By Alex P. Chase

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5/8, 05:59 EDT
Datadog, Inc.
Lyft, Inc.
Rivian Automotive, Inc.
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Key Takeaway

  • Rivian's stock fell over 4% pre-market after a Q1 loss of $38,784 per vehicle; analysts remain cautious amid intense EV competition.
  • Baird upgrades Datadog to outperform with a 24% price target increase, citing its strong position in cloud computing and AI growth potential.
  • Mixed corporate earnings drive cautious optimism in the S&P 500, with companies like Dutch Bros and Lyft surging post-earnings, contrasting Rivian and ZoomInfo's declines.

Wall Street's Rivian Outlook

Analysts remain cautious about Rivian Automotive Inc. following its latest quarterly earnings report. Goldman Sachs analyst Mark Delaney maintained a Neutral rating on the electric vehicle (EV) maker, citing the intense competition in the EV market as a potential barrier to Rivian's profitability and free cash flow growth. Delaney's stance reflects broader uncertainty about Rivian's ability to achieve its fourth-quarter goal of positive gross profit. Rivian's shares saw a decline of over 4% in pre-market trading after revealing a loss of $38,784 per vehicle delivered in the first quarter. Despite surpassing revenue expectations and expressing confidence in achieving modest gross profit by the year's end, Rivian's stock has fallen more than 56% this year amid growing competition in the EV sector.

Barclays analyst Dan Levy described Rivian as a "show me story," emphasizing the need for clarity on the company's cost reduction efforts. He noted Rivian's first-quarter performance, including an EBITDA beat and maintained 2024 guidance, but highlighted the importance of cost management. Wells Fargo analyst Colin Langan also commented on the challenges Rivian faces, particularly regarding its breakeven targets, and adjusted his price target to reflect a slight downside potential.

Datadog's Upgrade by Baird

Following a significant sell-off, Baird upgraded Datadog to outperform from neutral, setting a new price target that suggests a 24% upside. This upgrade comes in the wake of Datadog's shares dropping 11% after the announcement of President Amit Agarwal's resignation, overshadowing its better-than-expected earnings and revenue for the first quarter. Baird analyst Will Power highlighted Datadog's position as a leading cloud-native observability platform, poised to benefit from the accelerating shift to cloud computing. Power also pointed to early contributions from AI to growth and potential market share gains as reasons for the upgrade, despite Datadog's shares declining more than 7% year to date.

Mixed Corporate Earnings Impact

The S&P 500 Index saw a modest increase, reflecting a mixed corporate earnings landscape that has investors weighing cautious optimism against diverse market fortunes. Companies like Dutch Bros, Lyft, and Reddit experienced share surges post-earnings, driven by strong sales and positive forecasts. Conversely, Rivian and ZoomInfo faced declines due to financial concerns, underscoring the varied outcomes within the U.S. equities market. This mixed earnings picture highlights the ongoing debate among investors about the market's ability to sustain its current momentum.

Street Views

  • Mark Delaney, Goldman Sachs (Neutral on Rivian):

    "We maintain our Neutral rating on the stock given the high degree of competition in the EV market, which we believe could limit overall profitability/FCF growth."

  • Dan Levy, Barclays (Neutral on Rivian):

    "RIVN posted a fine 1Q, including an EBITDA beat and maintained 2024 guidance... Yet we believe the key test ahead for RIVN will be on the path of cost reduction – both in the near-term and in the mid-term upon the launch of R2."

  • Colin Langan, Wells Fargo (Neutral on Rivian):

    "Its limited production and commercial history leaves much to be seen. Rivian must prove it can acquire the customer base while maintaining low advertising costs."

  • Will Power, Baird (Bullish on Datadog):

    "DDOG possesses the industry-leading cloud native observability platform that we believe should continue to benefit from the accelerating shift to the cloud... In short, we like the multi-faceted growth opportunity, and expect its combination of growth and cash flow to stand out."