Rivian Pops On Mercedes-Benz EV Van Deal; Cash Burn Still A Worry: Analyst| Investor’s Business Daily

Starting electric vehicles Rivian Automotive (SHORE) and German automaker Mercedes-Benz have signed a memorandum of understanding to manufacture large electric vans for each of its brands, according to a joint statement Thursday. RIVN stock jumped on the news.




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The companies intend to open a new plant in Central and Eastern Europe, where Mercedes-Benz has an existing site. The joint venture would begin production “within a few years,” according to the statement.

“This is a major step towards the European strategy with a key partner such as Mercedes,” Wedbush analyst Dan Ives told IBD. “Rivian has a unique window of opportunity to seize the European business opportunity through 2023 and beyond.”

Mercedes already manufactures commercial vans. The two companies are expected to produce two large electric vans: one based on the Mercedes-Benz Vans electric-only platform and the other based on the second-generation Rivian Light Van (RLV) electric van platform. ).

Rivian manufactures commercial vans for Amazon (AMZN). The online retail giant rolled out its first Rivian-made electric vans on July 21. Amazon, which has an 18% stake in Rivian, has ordered 100,000 of its electric vans.

Meanwhile, CFRA Research analyst Garrett Nelson is cautiously optimistic about the deal’s impact on Rivian’s business in the long term.

“Rivian’s memorandum of understanding with Mercedes is positive, although it does little to change the near-term outlook and the company’s cash burn rates, which are of greater concern to investors, particularly with a handful of start-up electric vehicle companies that have recently filed for bankruptcy or warned of liquidity issues,” he told IBD.

Rivian’s second quarter sales were approximately $364 million. But he reported an adjusted net loss of $1.62 per share. It had about $15.46 billion in cash and cash equivalents, about $1.5 billion less than the first quarter closing.

River stock

Rivian shares rebounded almost 11% to 36.88 on the stock market today. RIVN stock is far from actionable, however, as it is trading well below its IPO price of $78.

Rivian stock is trading above its collapse 50 day lineaccording MarketSmith. But it is well below its relatively new 200-day moving average.

Stocks have a low RS Ranking out of 19 out of the best 99 possible.

Rivian production

Rivian produced 4,401 vehicles in the second quarter, a jump of 72% from the previous quarter. It delivered 4,467 vehicles, a 264% increase over the first quarter.

The company reiterated that it is on track to meet its production target of 25,000 electric vehicles for 2022, but that is half of its initial estimate of 50,000.

Rivian says it doesn’t expect to be profitable in the foreseeable future. The ramp-up of production was jerky, with the typical growing pains of a startup. Industry-wide supply chain issues have hit Rivian particularly hard because it has yet to build strong relationships with its suppliers.

“As supply headwinds continue to challenge Rivian’s ability to produce vehicles, the production story will be in the spotlight over the coming quarters,” Ives said in a recent report to customers.

Nonetheless, Ives maintains an outperform rating while raising the RIVN stock price target from $40 to $45, “reflecting greater confidence in the production story.”

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.

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