Rivian stock price jumped sharply on Wednesday after the company unveiled details of its $5.8 billion joint venture with Volkswagen. It jumped to $12, up by 25.6% from its lowest level this month, valuing the EV company at over $10 billion.
Rivian and Volkswagen joint venture
The main catalyst for the RIVN share price was the final details on the company’s joint venture with Volkswagen, the biggest European automaker. This JV is now known as Rivian and VW Group Technology, with teams being based in San Francisco.
The JV aims to provide Volkswagen with advanced software and electrical architecture to power its brands. At the same time, the deal will provide Rivian with much needed cash as its boost its troubled balance sheet. Most notably, Rivian will use the cash to ramp up the production of R2 SUV that will launch in 2026.
The deal is contingent on Rivian meeting several milestones, meaning that there are chances that it will fail. For one, a similar plan with Ford Motor Group did not work out a few years ago. Instead, the company cancelled plans to co-develop an EV in 2019.
At the same time, Volkswagen is under increased scrutiny in Germany, where it is going through a painful restructuring that could lead to thousands of job losses. It is considering shutting down three plants in the country.
According to the documents revealed on Wednesday, Rivian has already received $1 billion from VW. It will then receive $1 billion in 2025, $2 billion in 2026, and $460 million in early 2027.
Therefore, the Rivian stock price jumped because analysts believe that the joint venture will be beneficial to the company in the long term.
Rivian’s business is under pressure
The most recent results showed that Rivian’s business was going through a rough patch, which explains why its deal with Volkswagen is so important.
Its third-quarter revenue dropped from $1.33 billion in 2023 to $874 million in the last quarter. These revenues came from the sale of 10,018 vehicles and about $8 million in regulatory credits.
Rivian is still losing substantial sums of money for all vehicles it sells. Its gross loss for the quarter was $392 million, equivalent to about $39,000 per vehicle. Its net loss was over $1 billion.
The management believes that Rivian can achieve profitability in the coming years. It expects that its production for this year will be between 47k and 49k, while its deliveries will be between 50k and 52k. These numbers were lower than the delivery figures that analysts were expecting.
Analyst believe that Rivian’s revenue for the current quarter will be $1.36 billion, a small 3.13% increase from the same period last year. It will then make $1.1 billion next quarter and $4.6 billion in 2024.
These numbers mean that Rivian’s business is no longer growing, which is a difficult place to be for a a growth-oriented technology company.
Still, there are signs that Rivian’s trucks have become more popular than those made by companies like Ford and General Motors. The two companies have had to slash their guidance for their EVs amid waning demand.
Analysts expect that Rivian will start to generate a profit in the coming years. The expected earnings per share for the year will be $4.03 followed by $2.68 in 2025. The average Rivian stock price forecast by analysts is $14.88, which is higher than the current $12.
Rivian stock is fairly undervalued as long as the company manages to turn a profit and avoids dilutive cash raises. If it can achieve Tesla’s net profit margin of 13%, it means that its annual profits will be $780 million, which is reasonable for a company valued at over $10 billion.
Rivian stock price analysis
RIVN chart by TradingView
The daily chart shows that the RIVN share price has formed what looks like a double-bottom pattern between $8.2 and $10. In technical analysis, this is one of the most bullish patterns in the market.
Rivian stock has remained below the 50-day and 100-day moving average, while the Relative Strength Index (RSI) and the MACD indicator have pointed upwards. Therefore, the stock will likely have a bullish breakout in the near term.
If this happens, the initial target for the stock will be $18.9, the neckline of the double-bottom pattern, which is 60% above the current level. A break above that level will point to more gains to $28, which is 138% from its current level.
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