Boom goes the dynamite. Rivian (NASDAQ:RIVN) investors – a suffering lot no doubt, considering the hammering the stock had been taking this year – have finally something to smile about.
Shares blasted higher on Wednesday on the back of a partnership the EV maker has nabbed with auto giant Volkswagen. The two companies announced a joint venture to develop next-generation software-defined vehicle (SDV) architectures, utilizing Rivian’s integrated software and electrical platform. Volkswagen intends to invest up to $5 billion in the partnership, including a $1 billion convertible note, which by the end of 2024 will convert to RIVN shares, an extra $1 billion in RIVN shares for both 2025 and 2026, and $2 billion split between an initial payment for the joint venture and a license for Rivian’s electrical architecture tech, as well as a loan on hand in 2026.
Wedbush analyst Daniel Ives underscores the deal’s significance, stating, “This is a core game changer for Rivian and changes the capital structure of the company looking ahead for the story and the Street’s view at a key time.”
Along with Rivian’s current cash reserves, the investments are anticipated to finance the EV maker’s operations through the ramp of the R2 in Normal, Illinois, and the midsize platform in Georgia. This support is expected to help pave the way for achieving positive free cash flow and significant scalability. More color on the endeavor should be provided by Rivian on its Investor Day on Thursday.
Ives applauds the move but thinks Rivian still must prove it can be a real force to be reckoned with in the EV space. “While this is an exciting announcement for us to see, in the eyes of the Street, the focus will still remain mostly on the R1 execution plans, production, optimization, the Georgia plant, and the profitability story for Rivian over the next quarter/12 months,” he summed up.
All in, Ives rates RIVN shares an Outperform (i.e., Buy) while increasing his price target from $15 to $20, indicating shares can add another 28% over the coming months. (To watch Ives’ track record, click here)
Looking at the ratings breakdown, based on a mix of 12 Buys, 9 Holds and 2 Sells, the stock claims a Moderate Buy consensus rating. That said, the $14.52 average target suggests the shares will remain rangebound for the time being. (See Rivian stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
