Electric vehicle (EV) maker Rivian (NASDAQ:RIVN) had its price target raised by RBC Capital following its deal with Volkswagen (OTCMKTS:VWAGY).
The German auto giant formed a joint venture with the American company that could be worth $5 billion. Volkswagen is putting $1 billion of cash into Rivian and forming a joint venture around its technology both companies will draw from.
The deal initially sent RIVN stock up 25%, but it has since fallen back. It opened today at $14.26 per share, with a market capitalization of about $13.8 billion.
Crossing Death Valley
Like other EV companies, Rivian is going through a “Death Valley” of excessive supply and slow growth. The threat of Chinese EV “dumping” hangs over the industry, which Western governments are resisting with tariffs.
Since the start of 2024, Rivian stock has fallen 40%. Investors worry about losses on its R1 line, the profitability of its coming R2 line, and whether the R3, due to be built in Georgia, will ever be made.
However, RBC, which has a “hold” rating on the stock, is being joined by other analysts like Barclays in predicting survival.
Rivian has promised a gross profit in the fourth quarter. Once the R2 goes into production, Bank of America sees material costs dropping 45%. Combine that with its reputation for quality, analyst John Murphy writes, and success is in sight.
Rivian first came to prominence five years ago when Amazon (NASDAQ:AMZN) ordered 100,000 delivery vans and bought 20% of the company. Ford Motor (NYSE:F) also invested $500 million but later sold out.
Rivian’s 2021 initial public offering (IPO) raised $11.9 billion, and shares rose to nearly $180 each before collapsing in 2022. They’re now down 86% from the highs.
RIVN Stock: What Happens Now?
Rivian now must deliver on its profit promises. The stock price is unlikely to move much until there is clarity.
As of this writing, Dana Blankenhorn had a LONG position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in AMZN and F.
