Rivian's VW partnership seen as 'game changer' for EV maker's prospects

By Steve Gelsi

Wedbush lifts price target on Rivian as stock rallies on heavy volume

Rivian Automotive Inc. drew praise from Wall Street on Wednesday as its stock rallied on the electric vehicle maker's joint venture with German car giant Volkswagen AG.

Wedbush analyst Daniel Ives boosted his Rivian (RIVN) target price to $20 from $15 a share and said the partnership amounts to a "game-changer" for the company.

The $5 billion investment by Volkswagen (XE:VOW) into Rivian to develop software for electric vehicles from both companies "changes the capital structure of the company," Ives said.

See also: VW shares slip on plan to spend up to $5 billion in Rivian deal

Rivian's stock was up by 29%, with volume of 140 million shares in morning trading. Typically, less than 38 million shares change hands on an average trading day.

Rivian shares were on track to end at their highest since Feb. 21, when they closed at $15.39. They were also poised to notch their best one-day percentage gain on record.

The gains came after Rivian's new VW pact was announced late Tuesday. .

"Rivian will leverage this opportunity by utilizing this robust capital roadmap to support future growth while vertically integrating its software platform and electrical architecture while achieving further cost savings and deliver improved vehicles down the line," Ives said.

Going forward, Wall Street will now keep a close eye on Rivian's execution of its production and optimization for its new vehicles, the status of the car company's Georgia plant, and its overall "profitability story" over the three to 12 months, Ives said.

Stifel analyst Stephen Gengaro reiterated a buy rating and $18 price target on Rivian and said VW's use of Rivian's zonal architecture "validates" the EV car maker's technology.

It will also provide Rivian with capital to roll out its new R2 vehicle and build up its production in Georgia.

"Given RIVN's high-quality product, strong brand recognition, and upcoming mid-priced vehicles (R2/R3 and variants), we view the removal of the funding concerns as a very significant positive for the shares," Gengaro said Wednesday.

Adam Jonas at Morgan Stanley said he estimated that Rivian needed about $8 billion in cash through 2027 before the Volkswagen's announcement. The agreement with the German maker is "a relatively efficient form of capital raising given other alternatives," Jonas said in his note.

"The longer term (and bigger) challenge, in our view, is that Rivian needs help making cars profitably at scale," he said. Currently, the EV business looks like "a race to the bottom in terms of excess capacity into slowing demand and a Chinese EV machine just getting started in the export/transplant markets."

UBS analyst Joseph Spak also highlighted the way the partnership was an "efficient" way for Rivian to get a cash infusion. Volkswagen likely will provide scale, "which could accelerate cost reductions and also lead to other purchasing synergies."

Auto JVs "have a mixed track record, so execution is still paramount," Spak said.

Tom Narayan at RBC Capital said he's hearing from investors with more questions about Volkswagen and why the deal would make sense for the legacy car maker.

"For the most part, this is a software deal for VW," Narayan said. Volkswagen is unlikely to want to buy Rivian and if Rivian fails, Volkswagen can simply take over the JV, Narayan said.

Prior to Wednesday's gains, Rivian stock was down by 49% in 2024, while the Nasdaq COMP has gained 18% so far this year.

Claudia Assis in San Francisco contributed to this report.

-Steve Gelsi

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06-26-24 1149ET

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