The share price of electric vehicle startup Rivian (NASDAQ: RIVN) is showing strength as investors react positively to news of a significant investment in the struggling firm.
Although RIVN ended the last trading session down 4% with a valuation of $10.58, the stock was up over 11% during the pre-market session on November 13.
The stock has struggled throughout 2024 amid rising competition and a slowdown in EV market demand, leading Rivian to plunge by almost 50% year-to-date.
Picks for you
Why Rivian stock is surging
The current recovery coincides with news that German automaker Volkswagen Group has increased its planned investment in Rivian to $5.8 billion and unveiled a new joint venture.
According to Rivian, the joint venture, dubbed Rivian and VW Group Technology, will start on November 13. Volkswagen plans to invest up to $5.8 billion in Rivian and the joint venture by 2027.
The new partnership seeks to offer both companies next-generation electrical architecture and software technology. Before this latest development, the two automakers revealed their partnership in June. Volkswagen was initially expected to invest $5 billion in Rivian.
This deal will likely benefit Rivian, which has been on a loss-making streak in recent quarters. Specifically, Rivian’s Chief Software Officer, Wassym Bensaid, noted that through the partnership, the EV maker could achieve cost savings through economies of scale provided by Volkswagen, a larger player in the auto world.
Analysts’ take on Rivian stock
Following developments around the Volkswagen deal, Stifel analyst Stephen Gengaro projected potential upside for the equity, setting a ‘Buy’ rating with an $18 price target.
“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 said.
The joint venture with Volkswagen comes at an opportune time, considering that other Wall Street analysts had turned bearish on the equity following Donald Trump’s re-election.
As reported by Finbold, Bank of America (NYSE: BAC) downgraded Rivian stock from ‘Buy’ to ‘Neutral’ while lowering the price target from $20 to $13. According to the bank’s John Murphy, Rivian could be impacted if the new administration repeals federal regulatory credits offered to EV manufacturers.
Dan Ives from Wedbush had previously warned that if these credits are removed, Tesla (NASDAQ: TSLA) will likely be the only EV manufacturer to thrive due to its dominant market position.
Truist also lowered its target from $16 to $12, maintaining a ‘Hold’ rating due to ongoing production setbacks for Rivian. Mizuho reduced its target to $12, noting U.S. EV demand challenges but remaining optimistic about Rivian’s R2 platform and Volkswagen partnership.
Rivian’s recovery
Indeed, Rivian has faced challenges recently as it seeks to become profitable. After disappointing Q3 results, Rivian reduced its annual earnings forecast and production outlook. Revenue was $874 million, missing Wall Street’s $990 million expectation, with a net loss of $1.1 billion.
Production guidance was cut from 57,000 units to 47,000–49,000 due to supply chain issues.
Amid these challenges, Rivian continues to implement measures to improve its prospects. For instance, the company signed a five-year battery supply agreement with LG Energy Solution Arizona.
The EV maker aims to cut sourcing and production costs through this deal, likely reducing battery weight and improving battery pack assembly processing.
Featured image via Shutterstock
