Rivian Automotive's () - IPO gained approximately $11 billion in profit for Amazon () -. That increased the company's fourth-quarter earnings per share (EPS) through the roof, with Amazon reporting EPS of $27.75, which is far greater than the expected $3.66.
This time around, analysts are forecasting Amazon's EPS to be $8.22. If Amazon's higher-than-expected Q4 EPS helped the stock strengthen last time, can we expect Rivian to help lift Amazon stock again?
Investors should not count on it for a moment.
Rivian Automotive's Q1 Gains Might Impact Amazon's Figure 1
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Rivian's Loss on Amazon
Companies must update the fair values for their securities when disclosing their balance sheets each quarter. In the case of public corporations, these securities are valued in terms of market capitalization, by using the last trading day of the quarter.
When Amazon reported a net profit of $14.3 billion, of which $11.8 billion corresponded to non-operating income from its stock investment in Rivian, shares traded at $103.69.
Rivian's stock was down by more than 50% on March 3, resulting in an exchange of $50.24. Amazon lost $5.9 billion 50% just by holding the stock.
A Hard Recovery
The e-commerce sector isn't the only one to be faced with significant economic woes. Rivian is dealing with a significant shortage of key components, such as semiconductors.
Is this a short-term constraint? Perhaps. However, the electric vehicle (EV) sector may face even more challenges.
RJ Scaringe, and electric vehicle manufacturers, will struggle to fill the need for electric batteries. In his words, microchip shortages would look like a "small appetizer to what we're about to experience on battery cells over the next two decades."
What Wall Street Is Saying
Despite Rivian's reversal, analysts are still speculating on the stock. According to TipRanks, the electric car manufacturer has six buy recommendations, versus one sell rating. The average price target is $85, implying an impressive 150% upside.
Microchip shortages are the main obstacle in the short term, which may interfere with the sector's projections for the next five years, according to Morgan Stanley CEO Adam Jonas. Nonetheless, he is confident that the world's transition to electric vehicles will happen, and Rivian will benefit.
(Disclaimers: this is not investment advice. This author may be lengthy one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Amazon Maven