Rivian (NASDAQ: RIVN), the electric vehicle startup, is witnessing a rebound in its share price as investors respond positively to the announcement of a major investment aimed at revitalizing the struggling company.
Despite closing the previous trading session down by 4% at a valuation of $10.58, RIVN shares rose more than 11% during the pre-market trading on November 13.
The stock has faced significant challenges throughout 2024, experiencing nearly a 50% decline year-to-date, largely due to intensified competition and a slowdown in demand within the EV market.
Reasons Behind Rivian’s Stock Surge
The recent uptick aligns with the news that Volkswagen Group, the German automotive giant, has expanded its investment in Rivian to $5.8 billion and announced a new collaborative venture.
This joint initiative, named Rivian and VW Group Technology, is set to commence on November 13. Volkswagen has pledged to invest up to $5.8 billion in Rivian and their partnership by 2027.
The new alliance aims to leverage advanced electrical architecture and software technology for both companies. Their partnership was first revealed in June when Volkswagen was initially slated to invest $5 billion in Rivian.
This collaboration is expected to prove beneficial for Rivian, which has been grappling with losses in recent quarters. Rivian’s Chief Software Officer, Wassym Bensaid, highlighted that the partnership could enable the electric vehicle maker to realize cost efficiencies through the economies of scale offered by Volkswagen, a much larger enterprise in the automotive industry.
Analyst Perspectives on Rivian Stock
In light of the Volkswagen agreement, analyst Stephen Gengaro from Stifel expressed optimism regarding Rivian’s stock, issuing a ‘Buy’ rating and setting a price target of $18.
“We believe the Joint Venture (expected to close by year-end) with Volkswagen, especially given it being a globally renowned brand, provides Rivian a substantial platform to showcase its technology leadership, opening the door for potential opportunities for Rivian to be a technology partner with other OEMs,” Gengaro stated.
The Volkswagen collaboration arrives at a crucial moment, as other Wall Street analysts recently adopted a bearish stance following Donald Trump’s re-election.
According to Finbold, Bank of America (NYSE: BAC) downgraded Rivian’s stock from ‘Buy’ to ‘Neutral,’ also reducing the price target from $20 to $13. Analyst John Murphy warned that Rivian might face challenges if the new administration were to eliminate federal regulatory credits available to EV manufacturers.
Dan Ives of Wedbush previously cautioned that the removal of these credits could make Tesla (NASDAQ: TSLA) the sole EV manufacturer to thrive given its strong market position.
Truist additionally lowered its target from $16 to $12 while maintaining a ‘Hold’ rating due to ongoing production challenges for Rivian. Mizuho adjusted its target to $12, acknowledging the difficulties in U.S. EV demand but remaining hopeful about Rivian’s R2 platform and the partnership with Volkswagen.
Rivian’s Path to Recovery
Rivian has indeed encountered various obstacles in its pursuit of profitability. Following underwhelming Q3 results, the company revised its annual earnings forecast and production guidance. It reported revenue of $874 million, falling short of Wall Street’s $990 million expectation, alongside a net loss of $1.1 billion.
Production estimates were reduced from 57,000 units to a new range of 47,000–49,000 due to supply chain hurdles.
Despite these challenges, Rivian is actively working to enhance its outlook. For example, the firm has secured a five-year battery supply agreement with LG Energy Solution Arizona.
Through this agreement, the EV manufacturer aims to lower sourcing and production costs, potentially reducing battery weight and streamlining battery pack assembly processes.
Image Source: Piotr Swat / Shutterstock
