On Wednesday, CFRA maintained a Sell rating on Rivian (NASDAQ:RIVN) Automotive Inc (NASDAQ:RIVN) but increased the price target to $8.00 from the previous $5.00. This adjustment comes in the wake of Volkswagen (ETR:VOWG_p)'s announcement of a substantial investment in Rivian as part of a joint venture (JV) aimed at sharing electric vehicle (EV) architecture and software.
Volkswagen is set to make an initial investment of $1 billion into Rivian, with the potential for an additional $4 billion in the future. The collaboration between the two companies is expected to develop next-generation software-defined vehicle platforms for use in their respective future EVs. This joint venture is seen as a significant endorsement of Rivian's capabilities, despite the company's ongoing operational challenges and substantial cash burn rates, which have been reported at around $1 billion per quarter.
The partnership raises questions about Volkswagen's strategy, as Rivian has been identified as a struggling EV maker with the possibility of future going concern risks. However, Volkswagen appears to recognize the value in accessing Rivian's vehicle architecture and software.
Following the announcement of the deal, Rivian's stock experienced a surge in after-hours trading. This reaction is believed to be largely driven by the company's high short interest, which accounts for approximately 19% of its float. Despite the positive news, CFRA still anticipates that Rivian may have to reduce its 2024 production and EBITDA guidance.
In other recent news, Volkswagen has announced a significant investment in Rivian, committing up to $5 billion to a joint venture aimed at bolstering their positions in the electric vehicle market. The partnership seeks to leverage Rivian's software and electrical architecture expertise, with plans to launch vehicles equipped with the joint technology in the second half of the decade. Meanwhile, Truist Securities has adjusted its outlook on Rivian, increasing the electric vehicle maker's price target to $13.00 from the previous $10.00, maintaining a Hold rating on the stock.
The firm's revised estimate is based on Rivian's progress in achieving its production and financial goals. Guggenheim has also initiated coverage on Rivian with a Buy rating, indicating confidence in the company's potential to appeal to a younger, tech-savvy consumer base. In addition to these developments, Rivian has been focusing on various cost-cutting measures, leading to a 35% reduction in material costs for the company's vans and similar savings across other vehicle lines.
InvestingPro Insights
In light of CFRA's updated stance on Rivian Automotive Inc (NASDAQ:RIVN), InvestingPro data provides additional context to the company's financial health and market performance. Rivian's market capitalization currently stands at $11.9 billion, underscoring its substantial size in the EV segment. Despite the challenges highlighted by CFRA, Rivian has demonstrated a significant return over the last week, with an 8.53% price total return, and a strong return over the past month at 14.56%. This volatility in stock price movements, which are quite volatile according to an InvestingPro Tip, reflects investor sensitivity to news and market dynamics.
Moreover, Rivian's substantial revenue growth of 123.79% over the last twelve months as of Q1 2024 indicates a rapid expansion in sales, albeit from a low base. However, the company's gross profit margin remains negative at -40.63%, reinforcing CFRA's concerns about Rivian's operational efficiency and cash burn issues. InvestingPro Tips suggest that while Rivian holds more cash than debt on its balance sheet, analysts remain skeptical about the company's profitability in the near term, and its valuation implies a poor free cash flow yield.
For readers interested in a deeper analysis of Rivian's financials and market outlook, there are additional InvestingPro Tips available at https://www.investing.com/pro/RIVN. Use coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to exclusive insights that could further inform investment decisions. With 12 more InvestingPro Tips listed, investors can gain a comprehensive understanding of Rivian's position in the competitive EV landscape.
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