What Happened?
Shares of electric vehicle manufacturer Rivian (NASDAQ: RIVN) fell 4.8% in the afternoon session after Cantor Fitzgerald analysts downgraded the stock's rating from Buy to Neutral following its Q4 2024 earnings. The analysts highlighted key concerns, including "lower vehicle deliveries, fewer EDV [electric delivery van] deliveries, and worsening macro conditions, including the implementation of incremental tariffs and the likely removal of the $7,500 EV Tax Credit."
The quarter itself was mixed. RIVN's full-year EBITDA guidance missed, and its deliveries (46,000-51,000 vehicles) forecast for 2025 fell short of analysts' estimates. On the other hand, Rivian exceeded analysts' revenue, EPS, and EBITDA expectations. Importantly, its gross margin and free cash flow finally reached positive territory, marking a potential inflection point. Rivian had struggled with negative gross margins for quite some time before this print - the main reason it had to cut a ~$5.8 billion deal with Volkswagen in November 2024. Zooming out, we think this was a mixed quarter, with the weak outlook weighing on shares.
The shares closed the day at $12.95, down 4.7% from previous close.
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What The Market Is Telling Us
Rivian’s shares are extremely volatile and have had 51 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 21.3% on the news that the company announced a joint venture with vehicle manufacturer Volkswagen valued at up to $5.8 billion, starting November 13, 2024. The joint venture is expected to help both companies develop next-generation electrical architecture and software technology for electric vehicles, covering all relevant vehicle segments, including subcompact cars. As a part of the deal, Volkswagen Group plans to invest up to $5.8 billion in Rivian and the joint venture by 2027. Volkswagen Group already made an initial investment of $1 billion in the form of a convertible note. Upon closing the joint venture, Volkswagen Group is expected to invest an additional $1.3 billion for IP licenses and a 50% equity stake in the joint venture. The rest of the investment, up to $3.5 billion, is expected to be a blend of equity, convertible notes, and debt at future dates based on clearly defined milestones. Overall, the deal highlights a unique opportunity for Rivian to improve the scale and efficiency of its operations using shared insights and resources from a brand like Volkswagen which has a broad market presence and respectable expertise.
Rivian is down 2.4% since the beginning of the year, and at $12.93 per share, it is trading 28.6% below its 52-week high of $18.11 from July 2024. Investors who bought $1,000 worth of Rivian’s shares at the IPO in November 2021 would now be looking at an investment worth $128.36.
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