Rivian (NASDAQ:RIVN) should be celebrating this month, as the EV company officially inked a joint venture with the Volkswagen Group, the German manufacturer behind leading global brands like Audi and Porsche.
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The $5.8 billion deal demonstrates Volkswagen’s vote of confidence in Rivian’s wares, particularly its software stack and electrical architecture. The agreement also provides a large cash infusion for Rivian, which will help support the launch of the company’s R2 SUV during FY2026.
However, top investor JR Research cautions that Rivian shareholders may need to brace for a reality check.
“Rivian’s delivery and production performance has faltered over the past two quarters (on a trailing twelve-month basis). It aligns with management’s commentary, suggesting the impact of more intense competition and macroeconomic headwinds,” JR noted.
Adding to the headwinds, JR highlights a looming regulatory challenge. The Trump Administration is reportedly planning to eliminate the $7,500 EV tax credit – a critical incentive for Rivian’s sales strategy.
California’s governor has proposed a new rebate program to counteract the potential loss of federal tax credits. While this offers some hope, it’s unlikely that California alone can rescue Rivian from broader financial pressures.
This is all occurring against a backdrop of continued operating losses and no clear path to profitability.
Though the company claims that it will begin delivering positive gross margins by the end of 2024, the investor points out that there will be massive capex requirements in the coming years. This is expected to prevent the company from achieving free cash flow profitability until after FY2026.
As JR puts it, “Rivian must demonstrate a more robust delivery and production ramp profile over the next four quarters” or investors may regret jumping on the RIVN bandwagon too soon.
To this end, JR stays on the sidelines, giving RIVN shares a Hold (i.e. Neutral) rating. (To watch JR Research’s track record, click here)
Turning to Wall Street analysts, projections for RIVN indicate a split between the believers and the fence sitters. The stock’s Moderate Buy consensus rating is derived from 9 Buys, 11 Holds, and 1 Sell. However, the bulls seem to have the upper hand; with an average price target of $15, shares are expected to trade at a ~29% premium in a year’s time. (See RIVN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
