Rivian Stock Surges Despite Challenges: Joint Venture with Volkswagen and Q3 Earnings Insights

Rivian Automotive Inc. has seen a significant surge in its stock price in after-hours trading, rising by 9.64% to $11.60, following several key announcements and the release of its third-quarter earnings report.

The company’s recent earnings report highlighted several challenges, including persistent supply-chain issues that have impacted motor production and extended into the fourth quarter. Despite these setbacks, Rivian expressed optimism about the introduction of new R1 vehicle variants, such as the Tri Motor, slated for release next year. The company also reaffirmed its production forecast of approximately 48,000 vehicles for 2024, representing a 17% year-over-year decrease.

A notable development is the announcement of a joint venture with Volkswagen, valued up to $5.8 billion. This partnership is expected to result in Volkswagen cars being produced as early as 2027, which could significantly boost Rivian’s production capabilities and market presence.

Analysts from DA Davidson and other firms have revised their stock price targets for Rivian. DA Davidson reduced its target to $12.00 from $13.00, citing ongoing supply-chain issues and growing competition in the electric vehicle sector. Despite these challenges, Rivian aims to achieve a positive gross margin by the fourth quarter of 2024 through strategies such as expedited depreciation of equipment, reductions in material costs, and increased revenue per vehicle.

Rivian’s financial position shows both strengths and weaknesses. The company holds more cash than debt on its balance sheet, providing a buffer against current production challenges. However, the third-quarter production snag due to a component shortage resulted in a higher-than-expected adjusted EBITDA loss of roughly $760 million. Management has revised the 2024 EBITDA loss estimate to a range between $2.825 billion and $2.875 billion.

Investors remain optimistic about Rivian’s potential to achieve positive gross profits in the fourth quarter, driven by improvements in variable costs and the expected boost from regulatory credits. Despite being the worst-performing car stock of 2024, Rivian’s long-term prospects and strategic moves continue to attract investor interest.