Rivian’s partnership with Mercedes is a major international win for the EV maker, analysts say

Rivian Automotive’s recently announced partnership with Mercedes-Benz Group is good news for the electric vehicle maker, according to analysts.

Last week Rivian Automotive Inc. RIVN,
and Mercedes-Benz Group AG MBG,

signed a Memorandum of Understanding for strategic cooperation and joint production of electric vans. The planned joint venture will custom-produce large electric trucks for Rivian and Mercedes-Benz, the companies said.

Under the terms of the agreement, a new power plant will be built using an existing Mercedes-Benz site in Central or Eastern Europe. The financial terms of the partnership have not been disclosed.

Look now: Mercedes, Rivian ink joint venture to build electric trucks

The deal gives Rivian its first major international footprint to meet growing global demand for electric vehicles, according to Wedbush analyst Daniel Ives. “We see this as a smart strategic move by Rivian to penetrate Europe while increasing EDV production [Electric Delivery Vehicle] platform to achieve its long-term growth and profitability goals,” he wrote in a note released Monday.

Rivian describes itself as a maker of “electric adventure vehicles,” such as the R1T truck and R1S SUV. Amazon.com Inc. AMZN,
recently began rolling out Rivian’s electric delivery trucks, boosting the company’s stock.

Rivian shares, down 63.8% this year, are up 40.1% over the past three months, compared with the S&P 500 Index’s SPX,
down 14.7% in 2022 and up 4.3% in the last three months.

Look now: Rivian ‘finally starting to turn the corner’, Wedbush says, raising EV maker’s price target

There is a big market opportunity ahead for Rivian, according to Ives. “We believe Rivian is poised to capture the massive influx of current and future EV demand by leveraging a unique global TAM [Total Addressable Market] from a basic engineering and design standpoint, along with Amazon’s commercial relationship, it has the potential to be a major driver of EVs over the next decade,” he wrote. “Production is improving to reach at least 25,000 deliveries this year and we are confident that customer bookings will continue to grow in year 23, with the stage set for an important year ahead.”

Wedbush maintained its $45 price target and outperform rating on Rivian.

Baird analyst Ben Kallo also believes the Mercedes-Benz deal is positive for Rivian and will increase its presence in Europe. “With few details revealed about the proposed partnership, the total addressable market (TAM) for electric trucks remains unclear,” he wrote. “Despite the lack of clarity, RIVN stands to benefit from Mercedes’ scale while also lending from its strong technological position.”

Rivian: The ‘Zombie’ Company or the Drive to EV Success?

Baird has a $51 price target and an outperform rating on Rivian. “As the world accelerates its shift to EVs, Rivian has a solid opportunity to mount a challenge to Tesla’s current dominance,” Kallo wrote.

Not everyone, however, is so bullish on Rivian’s prospects. Last month investment research firm New Constructs added Rivian to its list of “zombie” companies, citing cash as a potential problem for the automaker. Other companies on New Constructs’ “zombie” list include Robinhood Markets Inc. HOOD,
Carvana Co. CVNA,
Freshpet Inc. FRP,
Peloton Interactive Inc. PTON,
Snap Inc. SNAP,

and Beyond Meat Inc. BYND,

Rivian last month reported a smaller-than-expected loss for the second quarter, but said it now expects a loss of $5.45 billion in 2022, up from a previous estimate of a loss of $4.75 billion.

Look now: Rivian is discontinuing the least expensive version of its electric pickup

Of the 18 analysts surveyed by FactSet, 11 have an overweight or buy rating on Rivian, six have a hold rating and one has an underweight rating.

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