What Happened?
Shares of electric vehicle manufacturer Rivian (NASDAQ:RIVN) jumped 15.2% in the morning session after Benchmark analyst Mickey Legg initiated coverage on the stock with a Buy rating and $18 price target. Legg believes Rivian can attract more customers, pointing to growing opportunities in the electric vehicle (EV) market. He said, "After a pause this year, domestic EV production is expected to improve in 2025 and further accelerate in 2026 to 2027 as average selling prices decline and the charging infrastructure is built out.".
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What The Market Is Telling Us
Rivian’s shares are extremely volatile and have had 52 moves greater than 5% over the last year. But moves this big are rare even for Rivian and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 26 days ago when the stock gained 21.3% on the news that the company announced a joint venture with vehicle manufacturer Volkswagen valued at up to $5.8 billion, starting November 13, 2024.
The joint venture is expected to help both companies develop next-generation electrical architecture and software technology for electric vehicles, covering all relevant vehicle segments, including subcompact cars. As part of the deal, Volkswagen Group plans to invest up to $5.8 billion in Rivian and the joint venture by 2027.
Volkswagen Group already made an initial investment of $1 billion in the form of a convertible note. Upon closing the joint venture, Volkswagen Group is expected to invest an additional $1.3 billion for IP licenses and a 50% equity stake in the joint venture. The rest of the investment, up to $3.5 billion, is expected to be a blend of equity, convertible notes, and debt at future dates based on clearly defined milestones.
Overall, the deal highlights a unique opportunity for Rivian to improve the scale and efficiency of its operations using shared insights and resources from a brand like Volkswagen which has a broad market presence and respectable expertise.
Rivian is down 30.4% since the beginning of the year, and at $14.69 per share, it is trading 39.7% below its 52-week high of $24.35 from December 2023. Investors who bought $1,000 worth of Rivian’s shares at the IPO in November 2021 would now be looking at an investment worth $145.80.
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