It looks like JPMorgan Chase (NYSE:JPM) was right. Earlier this month, the investment bank warned that Rivian (NASDAQ:RIVN) could soon be removed from the Nasdaq-100 Index due to having a weight of less than 0.1% for two consecutive months. Rivian’s weight tallied in at less than 0.1% as of April 28 and May 31. Since the Nasdaq-100 is a market-capitalization-weighted index, companies that increase in price (or market cap) will have a greater weight in the index. The reverse holds true as well.
Analyst Min Moon forecast that the electric vehicle (EV) company would be removed from the index on the third Friday of June, or on June 16. Further, Moon added that ON Semiconductor (NASDAQ:ON) would take RIVN’s place.
This morning, Nasdaq announced that Rivian would in fact be removed from the index prior to the market open on June 20. ON Semiconductor will take the company’s place.
RIVN Stock to Be Removed From Nasdaq 100
The Nasdaq-100 won’t be the only index that RIVN stock is removed from, as many other indices adjust their portfolio weights based on the Nasdaq-100. The Nasdaq-100 Equal Weighted Index, Nasdaq-100 ESG Index and Nasdaq-100 Ex-Tech Sector Index are all derivatives of the Nasdaq-100, which means they will be forced to remove RIVN as well. Removing a company from an index involves selling all of the shares held within the index. This could have a detrimental effect on RIVN stock if there are not enough buyers to pick up the sold-off shares.
RIVN stock has fallen by about 20% so far this year amid heavy automotive competition, supply-chain inefficiencies and ramp-up challenges. The company held its initial public offering (IPO) in November 2021 with shares priced at $78 apiece. During the three months ended March 31, Rivian produced 9,395 vehicles and delivered 7,946 of them. It has an annual production goal of 50,000 vehicles, which means it must produce 40,605 vehicles from Q2 to Q4 to meet its goal.
Still, Wall Street analysts remain upbeat on Rivian’s prospects. RIVN has an average price target of $23.80 among 20 analysts with coverage of the stock. That implies a significant upside of about 70% from current levels. Earlier this month, Barclays also reaffirmed its $22 price target and “outperform” rating for shares.
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.
