Rivian Stock is Red-Hot on $5 Billion Volkswagen Team Up

Rivian Automotive (RIVN) stock is one of the best performers Wednesday, up nearly 30% Wednesday after the electric vehicle (EV) maker announced a major partnership with Volkswagen Group.

Under the terms of the deal, Volkswagen will make an initial investment of $1 billion in Rivian through an unsecured convertible note. This will convert into Rivian common stock on or after December 1, 2024, the companies said in a press release. 

Volkswagen will invest an additional $1 billion in both 2025 and 2026. The German automaker will also make an extra $2 billion investment in 2026 as part of a joint venture that will "create next-generation software-defined vehicle (SDV) platforms to be used in both companies' future electric vehicles."

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The investment will accelerate the development of software for both automakers and will allow them to combine their strengths while lowering the cost per vehicle through scale and speeding up innovation, the companies said.

"We're very excited to be partnering with Volkswagen Group," Rivian founder and CEO RJ Scaringe said in a statement. "Since the earliest days of Rivian, we have been focused on developing highly differentiated technology, and it's exciting that one of the world's largest and most respected automotive companies has recognized this."

Meanwhile, Volkswagen Group CEO Oliver Blume said its customers will "benefit from the targeted partnership with Rivian to create a leading technology architecture."

Is Rivian stock a buy, sell or hold?

Wall Street is generally bullish towards the consumer discretionary stock. According to S&P Global Market Intelligence, the average analyst target price for RIVN stock is $16.30, representing implied upside of about 6% to current levels. Additionally, the consensus recommendation is Buy. However, these estimates may be revised higher following the Volkswagen news.

Financial services firm Wedbush is one of those firms revising their price target after the news. 

"We are raising our price target on Rivian from $15 to $20 while maintaining  our Outperform [Buy] rating with the VW news a game changer for the Rivian story," Wedbush analyst Daniel Ives said in a note this morning. "This is a core game changer for Rivian and changes the capital structure of the company looking ahead for the story and the Street's view at a key time."

Wedbush's new $20 price target represents implied upside of roughly 30% to current levels.

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