Rivian’s Mercedes partnership an important international win for the EV maker, say analysts

Under the terms of the deal, a new electric-only manufacturing facility will be built using an existing Mercedes-Benz site in Central or Eastern Europe. Financial terms of the partnership have not been disclosed.

See Now: Mercedes, Rivian ink joint venture to make electric vans

The deal gives Rivian its first key international footprint to meet the growing global demand for EVs, according to Wedbush analyst Daniel Ives. “We view this as a smart strategic move by Rivian to penetrate Europe while ramping production of the EDV [Electric Delivery Vehicle] platform to meet its long-term growth and profitability targets,” he wrote, in a note released on Monday.

Rivian describes itself as a maker of “electric adventure vehicles,” such as its R1T pickup truck and R1S SUV. Amazon.com Inc.
AMZN,
+1.51%
recently started rolling out Rivian’s electric delivery vans, giving the company’s stock a boost.

Shares of Rivian, which have fallen 63.8% this year, have risen 40.1% in the last three months, compared to the S&P 500 Index’s
SPX,
+0.62%
decline of 14.7% in 2022 and 4.3% rise over the last three months.

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

There is a big market opportunity ahead for Rivian, according to Ives. “We believe Rivian is primed to capture the massive influx of current and future EV demand, capitalizing on a unique global TAM [Total Addressable Market] from a core engineering and design perspective along with the Amazon commercial relationship has the potential to be a major EV stalwart over the next decade,” he wrote. “Production is improving to at least hit the 25k deliveries this year and we have confidence that customer reservations continue to increase into FY23 with the stage set for a seminal year ahead.”

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

Baird analyst Ben Kallo also believes that the Mercedes-Benz deal is a positive for Rivian, and that it will increase its presence in Europe. “With few details disclosed regarding the proposed partnership, the total addressable market (TAM) for electric vans is still vague,” he wrote. “Despite a lack of clarity, RIVN is set to benefit from Mercedes’ scale while lending from its strong technology position.”

Rivian: ‘Zombie’ company or charging down a path to EV success?

Baird has a $51 price target and outperform rating for 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 as positive 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 car maker. Other companies on New Constructs’ “zombie” list include Robinhood Markets Inc.
HOOD,
+3.35%,
Carvana Co.
CVNA,
+7.26%,
 Freshpet Inc.
FRPT,
+3.11%,
 Peloton Interactive Inc.
PTON,
+2.91%,
 Snap Inc. 
SNAP,
-1.20%
and Beyond Meat Inc.
BYND,
-0.93%.

Last month Rivian reported a narrower-than-expected second-quarter loss but said it now expects a 2022 loss of $5.45 billion, wider than its prior estimate of a $4.75 billion loss.

See Now: Rivian eliminates less-expensive version of its electric pickup

Of 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.