Shares of Rivian (NASDAQ:RIVN) stock are on shaky grounds following a report from JPMorgan Chase (NYSE:JPM). The investment bank stated that RIVN stock could be booted out of the Nasdaq 100 as soon as this month due to its teetering weight in the index.
According to analyst Min Moon, the index generally removes its smallest members if the companies carry an index weight of less than 0.1% for two consecutive months. Rivian’s weight was below 0.1% as of April 28 and May 31. As a result, Moon believes that Rivian will be removed from the index on the third Friday of June or on June 16. The analyst added that ON Semiconductor (NASDAQ:ON) could likely take its place.
RIVN Stock: JPMorgan Sounds the Alarm on Nasdaq 100 Eligibility
Shares of RIVN have fallen by over 10% in 2023 and by over 50% in the past year. The electric vehicle (EV) company priced its initial public offering (IPO) shares at $78 in November of 2021, a far cry from the current price of about $14.75.
The Nasdaq 100 operates as a market-capitalization-weighted index. That means that companies with the largest market cap will have a greater weighting and price effect on the index, while smaller cap companies will have a lower weighting and a less significant impact on the index. This somewhat reflects a momentum strategy, as stocks that increase in price, or market cap, will have more weight in the index.
A removal of RIVN from the index would also have a detrimental effect on its price, as the index would sell out of all of its shares. Variances of the index would follow along as well to reflect the new changes.
Barclays Reaffirms RIVN Price Target of $22
In more optimistic news, Barclays reaffirmed its RIVN price target of $22 and its “Outperform” rating this morning. The price target was reaffirmed after Barclays analysts visited Rivian’s plant in Normal, Illinois and spoke with company executives.
“With better stability, RIVN now has the bandwidth to properly address manufacturing process improvements / material cost reduction initiatives – there is much low hanging fruit, much runway, and clear improvements are being made,” said analyst Dan Levy.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
