Rivian Automotive Inc. RIVN has seen its stock surge following news of a substantial $5 billion investment from Volkswagen AG VWAGY, prompting discussions among investors, including Tesla Inc. TSLA bull Gary Black and investor Ross Gerber, about the rationale behind German auto giant’s strategic move.
What Happened: Black, a Tesla bull and the Managing Partner at Future Fund took to social media platform X to share his thoughts on the recent developments at Rivian. He wrote, “Some $TSLA investors don't appear to get the rationale of VW investing up to $5B in $RIVN.”
He pointed out that the $5 billion investment from Volkswagen could significantly expand Rivian’s total addressable market and provide VW with a substantial equity stake in the EV industry’s second-best and least leveraged brand.
Black also noted that Rivian’s software is generally considered inferior to Tesla’s, but the investment could still drive Rivian’s stock price up to $22 per share. Black highlighted that Amazon remains Rivian's largest shareholder with a 16% stake.
“I see $RIVN stock going to at least $22/share 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. TSLA trades at 5.9x 2024 EV/Revs,” Black wrote on X.
Black questioned why some Tesla investors seem to dislike Rivian, given that both companies are contributing to the transition to sustainable energy. He asked, “Why do some $TSLA investors so despise $RIVN? Both accelerate the world's transition to sustainable energy.”
Gary Black emphasized that Volkswagen is the “perfect parent” for Rivian, noting that Volkswagen is already set up to manage autonomous auto businesses with entirely separate brands, including Volkswagen, Audi, Porsche, Bentley, Lamborghini, and Bugatti.
Black also highlighted that Rivian’s financial situation is not as dire as some may believe, with the company having a cash runway of two years as of March.
Gerber, the CEO of Gerber Kawasaki Wealth and a Tesla investor, also weighed in on the news, calling it “great news for Rivian.” He believes that the investment from Volkswagen, which could keep Rivian afloat for a significant period, could provide the operational support that Rivian needs.
Why It Matters: This significant investment from Volkswagen is crucial for Rivian. Recently, Guggenheim initiated coverage on Rivian with a Buy rating, setting a price target of $18. The analyst, Ronald Jewsikow, highlighted Rivian’s potential to appeal to younger, digitally oriented consumers.
Additionally, Rivian’s stock saw a surge in after-hours trading following the news of Volkswagen’s investment. The joint venture between Volkswagen and Rivian will focus on developing next-generation battery-powered vehicles, with Volkswagen investing $1 billion immediately and an additional $4 billion over time.
Despite these positive developments, Rivian has faced challenges, including a recent recall of nearly 700 R1 vehicles due to incorrect weight capacity labeling on tires, as noted in a filing with the U.S. auto safety regulator.
Price Action: Rivian Automotive Inc. closed at $11.96 on Tuesday, up 8.63%. In after-hours trading, the stock surged by $5.97, a significant 49.92% rise, bringing the price to $17.93. Year to date, however, Rivian’s stock is down by 43.32%, according to data from Benzinga Pro.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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