Rivian (RIVN) stock jumped on Monday as investment bank Benchmark initiated coverage on the stock with a Buy rating and a bullish $18 price target.
Rivian has had a bumpy ride this year, with production issues at its factories and a loss projection still slated for the year. However, big partnerships, like its new joint venture with Volkswagen and tentative approval for a federal loan for its upcoming Georgia assembly plant, have boosted the company’s cash reserves and stock price.
Benchmark believes Rivian is at the beginning of a “massive market opportunity,” with EV penetration poised to grow by nearly 27% annually by 2035. Analyst Mickey Legg wrote that Rivian is poised to ride that wave due to several factors.
Rivian stock closed up 11.2%, hitting levels not seen since early August.
Amazon was an early investor in Rivian and signed a 100,000-unit commercial van delivery deal. Legg wrote this deal proved Rivian’s ability to build EVs domestically and leverage in-house software in its vehicles. This then led to Rivian’s deal with Volkswagen, which came earlier this year, expanding to a deal where Volkswagen will pay Rivian close to $5.8 billion to use its tech in upcoming EVs.
“We believe Rivian’s capability to manufacture EV’s domestically with in-house designed software has been validated through its partnerships with Amazon and Volkswagen,” Legg wrote, adding that “VW’s industry relationships and experience will help RIVN negotiate with suppliers and provide engineering synergies.”
Which then leads to costs, Legg’s other main point. In its rapid push to achieve “positive vehicle economics,” the company has cut down the cost of its bill of materials (cost of goods to build its trucks) and simplified its vehicle systems, leading to a 41% drop in cash use sequentially in Q2. Legg believes this will improve as Rivian continues to reduce material costs and scale its fixed costs across its second-generation R1 vehicles into its new R2 vehicles coming in 2026.
Rivian also projects a modest gross profit in Q4, which is consistent with Legg’s comments on cutting costs.
With costs coming down, Legg is also bullish on Rivian’s tie-up with Volkswagen, aside from validating Rivian’s product expertise. The cash runway produced by the deal gives the company time to build out its manufacturing and invest in its capabilities. The cash provided by VW is “sufficient to fund the business and growth initiatives by our estimates,” Legg said.
Rivian’s strong balance sheet is another positive for Legg. The company has over $6 billion on its balance sheet, and Legg believes Rivian has sufficient capital to reach “cash flow breakeven status” in its operations.
