Rivian Cars Inc.
- Following the announcement of a substantial $5 billion investment from Volkswagen AG (VWAGY), RIVN’s stock has surged. This has sparked conversations among investors, including Ross Gerber and Gary Black, who is bullish on Tesla Inc. (TSLA), on the reasoning for the German automaker’s calculated move.
- What Happened: Black, a Future Fund managing partner, and a Tesla bull used social media site X to express his opinions on the latest events at Rivian. “Some $TSLA investors don’t seem to get the rationale behind VW investing up to $5B in $RIVN,” the author stated.
- He emphasized that VW’s $5 billion investment may greatly increase Rivian’s entire addressable market and provide VW a sizeable ownership share in the second-best and least leveraged brand in the EV business.
- Even though Tesla’s software is usually seen as being superior, Black pointed out that Rivian’s stock price might potentially rise to $22 per share as a result of the investment. Black emphasized that, with a 16% investment, Amazon continues to be Rivian’s biggest stakeholder.
- “If RIVN trades at even a 4.0x FY’24 EV/Rev multiple from 3.2x at RIVN’s after-hours price of $18.20/share, I see $RIVN stock going to at least $22/share.” Black said on X, “TSLA trades at 5.9x 2024 EV/Revs.”
- Black questioned Rivian’s apparent distaste among some Tesla investors, considering that both businesses are aiding in the shift to sustainable energy. “Why do some $TSLA investors detest $RIVN so much?” he inquired. Both accelerate the global switch to renewable energy sources.
- Volkswagen is the “ideal parent” for Rivian, according to Gary Black, who also pointed out that VW is already equipped to run autonomous vehicle brands like Audi, Porsche, Bentley, Lamborghini, and Bugatti.
- Black further emphasized that, contrary to popular belief, Rivian’s financial status is not as bad as it seems, with a two-year cash runway as of March.
- Why It Matters: Rivian needs this large investment from Volkswagen. Guggenheim has begun covering Rivian with a Buy rating and a $18 price target. Ronald Jewsikow, the analyst, emphasized Rivian’s ability to draw in younger, tech-savvy customers.
- In addition, after-hours trading in Rivian’s shares surged on the announcement of Volkswagen’s purchase. Volkswagen and Rivian have formed a joint venture to create advanced battery-powered cars of the future. Volkswagen has committed to spend $1 billion upfront and an additional $4 billion in phases.
- Notwithstanding these encouraging advancements, Rivian has encountered difficulties. For example, a recent recall of around 700 R1 cars resulted from inaccurate tire weight capacity labeling, as reported in a file with the US Auto Safety Agency.
- Price Action: On Tuesday, Rivian Automotive Inc. finished 8.63% higher at $11.96. The price of the stock increased to $17.93 in after-hours trading, a noteworthy 49.92% increase of $5.97. Benzinga Pro data indicates that Rivian’s stock is down 43.32% year to date.
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Source:
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