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Rivian is a ‘category changer’ but ‘they need to execute flawlessly’: Analyst

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Wedbush Analyst Dan Ives joins Yahoo Finance Live to discuss Tesla's growth outlook, EV demands in American and Chinese markets, and the obstacles Rivian must overcome in production to secure a lasting spot in the EV space.

Video Transcript

BRIAN SOZZI: Shares of the EV maker could pop 30% next year. Friend of the show, Dan Ives of Wedbush joins us now. Dan, always nice to see you. I was looking over your note, and my first thought is 30% conservative? If Tesla comes out here, beats strongly in earnings in the first quarter, I mean, theoretically, you could see a pretty big move, especially after Elon has been dumping shares and pressuring the stock?

DAN IVES: Yeah. Look the haters will continue to hate, but ultimately in EV, you're going into a golden age 2022. You look at Tesla's demand in China, that's the linchpin. And I think that plays out and capacity builds in Berlin as well as Austin, that's really the combo that I think sends us to $1,400 is our base case, bull case is $1,800s.

BRIAN SOZZI: And Dan, too you know--

JULIE HYMAN: Dan--

BRIAN SOZZI: Oh, go ahead, Julie, go.

JULIE HYMAN: I'm just wondering what could go wrong?

DAN IVES: Look, I think in terms of what can go wrong, I mean, a lot of it is really competition is increasing across the board. So I think there's some worry there. But I don't view it as a zero-sum game, I view it as a $5 trillion green tidal wave. Ford, GM, is going to be successful, I think could be re-ratings, Rivian as well, the Chinese players like NIO front and center.

I think the biggest thing is really about China and about making sure that demand continues to accelerate but especially the supply chain. We think supply chain issues moderate in the first half of this year. You know, as we go into first-half '22 that moderates, I think that could add another 5% to 10% to the stock.

BRIAN SOZZI: Dan, Rivian continues to make headlines and I would say not exactly too great. A couple of weeks ago on earnings day said they're delaying trucks, came out today saying they're delaying a certain version of another truck. Do you think Rivian is just overvalued at these current levels, just it's going to have to go down the same production and manufacturing issues as Tesla did?

DAN IVES: Look, they're being viewed as the golden child of EVs coming out of the gate. And with that type of valuation, any shortfall, any misexecution is going to really get hit in terms of the stock. I think Rivian is really a category-changer in terms of where this goes over the next three, four, or five years.

But to your point, they need to execute flawlessly and that's really going to be the focus going forward for this stock to continue to move higher. We think they're one of the core winners. The battery push out I'm not too concerned about, but they need to make sure that they continue despite the chip shortage, hit and exceed Street expectations in terms of deliveries and production.

JULIE HYMAN: I want to go back to Tesla for a second and a graphic we were showing a few minutes ago, Dan, that shows the annual performance of Tesla. And that it's just been year, after year, after year of the stock going up on an annual basis. And again, like I just struggle with the-- I mean, it's not consistency because the magnitude of the gains have been all over the place here, but just that the idea that Tesla is just going to continue to be this dominant I sort of struggle with here.

DAN IVES: Yeah. I think it's a great point, but I don't view that they have to continue to have 80%, 90% market share. I mean, my view is it's a $5 trillion green tidal wave over the next decade. Even if share starts to recede a bit, I mean, we're talking about the biggest transformation to the auto industry since 1950s. And I've never viewed Tesla as an automobile company, I view them as a disruptive technology player.

But that's also why competition's coming from all angles, they got a target on their back. Any issues are going to be greatly exaggerated but it all comes down to if demand continues to accelerate like we've seen globally, capacity gets added in Berlin and Austin, they could be at 2 million vehicles from a capacity perspective. And that's why they have a massive opportunity in terms of what we're seeing from a customer adoption perspective.

BRIAN SOZZI: Dan, who is the biggest threat to Tesla's dominance, is it Ford, is it General Motors, is it Volkswagen, is it another name that we're not even talking about?

DAN IVES: Yeah. It's the 313 area code. I view it as it's Ford or GM. Because from a distribution, from a stalwart potential, you're talking about GM sells 7 million cars per year, you start to convert a significant amount of them. But I think it's really Ford. I think what Farley's finally had the golden touch at Ford, you see what's happened on the F-150, you look at the re-rating in the stock.

It's really the stalwarts that are going to be over time, more of the threat in the EV landscape rather than what I view as the pure plays. Even when you look at a Lucid, a Rivian, I mean, for them to get to scale, it's going to take five, six years. Ford, GM, and I'd say VW in Europe, continues to really be probably the biggest, I won't even say threat, I'd say probably the biggest opportunity as they all dive into the deep end of the EV pool.

JULIE HYMAN: Dan, just to take a bigger view here, if we go out to 2030 for example, what percentage of the cars on the road are going to be electric vehicles? And at that point, it seems like there's maybe a lot of winners to pick from.

DAN IVES: Well, I mean, Julie, that sort of summarizes really our point, what's been our bull thesis on Tesla over the last decade is we think it's 25% to 30% by the end of the decade that are EVs. Tesla continues to sort of own that market but you look at this transformation, you go from 3% of automobiles to 10% by 2025, to what's going to be basically one of every four by 2030. I mean, that's-- look, that's why I call it-- when you look what's going on-- and there's just a broader view across tech, across disruptive tech, it's the fourth Industrial Revolution playing out. And I think with a lot of these hyper-growth names when you look at valuation, just over the next year or two, you would have missed the Amazons, the Netflix, the Telsas, the Apples, and others. And I think many that have been haters on Tesla, I think if they were NFL scouts they would have been super negative on Tom Brady in the 2000 draft, probably still negative today.

BRIAN SOZZI: Dan, you're like the Tesla analyst out there on Wall Street. Just from a personal perspective, what has it been like covering this company this year?

DAN IVES: I mean, I think it's been a fascinating year because there's a circus show that we always have with Musk, from the Twitter poll to what we see across social media. You have the China issues, that was some dark days earlier this year, would have been very easy you know, I think for many to throw in the white towel. But look, this is always going to be an emotional bull-bear story in terms of Telsa.

And I think it's one where I think maybe that's even more divided today in terms of the valuation. But I continue to stress, I mean, that's why Ford's trading where it is. It's why you've seen more of the re-rating in GM, and it's why you're starting to see Rivian some of these others come out because investors have that strong appetite for this. But look, I love-- on Tesla, I love hearing from the lovers and the haters. It always makes it enjoyable covering it.

BRIAN SOZZI: Well, we love hearing from you, Dan Ives. Dan Ives of Wedbush, appreciate you always coming on. And have a happy new year.

DAN IVES: You too.