Goldman Sachs Maintains Neutral Rating on Rivian Despite Volkswagen’s Increased Investment

Rivian Automotive Inc. (RIVN) saw its stock receive a neutral rating from Goldman Sachs analyst Mark Delaney, even after Volkswagen AG (VWAGY) significantly increased its investment in their joint venture. While the increased investment, totaling up to **$5.8 billion**, bolsters Rivian’s financial position and highlights the strategic value of its technology, Goldman Sachs remains cautious due to market challenges and uncertainties surrounding the electric vehicle (EV) industry. The joint venture, focusing on collaborative development of electrical and electronic (E/E) architectures, signifies a crucial step for both companies, but external factors continue to influence the rating on Rivian’s stock.

Key Takeaways:

• Goldman Sachs maintains a Neutral rating on Rivian (RIVN) stock, despite a substantial increase in Volkswagen’s investment in their joint venture.
• Volkswagen’s investment increased to **$5.8 billion**, significantly improving Rivian’s balance sheet and liquidity.
• The joint venture will focus on developing advanced E/E architecture, including electronic control units (ECUs) and software.
• Rivian’s technology, particularly its software and services, is showcased as a key strategic asset through this collaboration.
• Despite the positive financial impact, Goldman Sachs cites a challenging competitive landscape and uncertainties about EV demand and policy as reasons for the Neutral rating.

Volkswagen’s Boosted Investment in Rivian’s Joint Venture

The newly operational 50-50 joint venture between Rivian and Volkswagen represents a substantial commitment to the future of electric vehicle technology. Volkswagen’s increased investment, now reaching a potential **$5.8 billion by 2027**, showcases their confidence in Rivian’s technological capabilities. This commitment is significantly higher than the initially planned **$5 billion**, reflecting an intensified strategic partnership. The investment structure comprises various components: an initial **$1 billion** convertible note, an additional **$1.3 billion** for IP licensing and equity, and a further **$3.5 billion** contingent on achieving predefined milestones in financial performance, technical achievements, and operational benchmarks.

Milestones and Funding Breakdown

The phased investment approach underscores the importance of performance metrics for both companies. Reaching the **$3.5 billion** milestone hinges on Rivian meeting specific targets. This structured investment demonstrates a shared risk and reward model, incentivizing both partners to achieve significant success. A portion of the investment is also structured as loans, adding to the financial flexibility for Rivian.

The Focus: Electrical and Electronic Architecture

The joint venture’s core objective centers on the advancement of electrical and electronic (E/E) architecture, specifically focusing on electronic control units (ECUs), network infrastructure, and related software. Rivian’s existing software and E/E architecture stack will be leveraged, significantly accelerating development for both partners. This collaborative approach allows both automakers to innovate and deploy cutting-edge technology, improving efficiency and reducing the time-to-market for new features.

Rivian’s R2 and Volkswagen’s Future Vehicles

The first vehicle to benefit from this collaborative effort will be Rivian’s R2 model, scheduled for production in the first half of 2026. This model will utilize the newly developed platform. Volkswagen plans to implement the resulting technology in its own vehicles by 2027, showcasing the long-term strategic value of this partnership. The collaborative development process already resulted in a demonstration model—a retrofitted Volkswagen vehicle—highlighting the tangible progress already achieved.

Goldman Sachs’ Perspective: A Neutral Outlook

While acknowledging the significant financial benefits of the Volkswagen investment for Rivian, Goldman Sachs analyst Mark Delaney maintains a Neutral rating on the stock. Delaney’s statement emphasized that: “**The deal highlights the strategic value of Rivian’s technology platform, particularly in software and services**,” solidifying the positive aspects of the joint venture. Despite this, the overall market environment, including the competitive landscape and uncertainties surrounding EV demand, prevents a more positive rating. Specifically, Delaney notes concerns about the challenging competitive landscape, uncertainties around EV demand, and policy risks in the U.S. market, all of which introduce uncertainty into Rivian’s future performance.

Revised Financial Estimates

Following the announcement, Goldman Sachs updated its financial estimates for Rivian, incorporating the improved balance sheet and reduced operating expenses, while also considering the anticipated equity method losses from the joint venture. The revised EPS projections, including stock-based compensation (SBC), show a slight improvement from previous estimates: –$4.49 for 2024, –$3.10 for 2025, and –$3.00 for 2026. Excluding SBC, the EPS projections are –$3.77 for 2024, –$2.35 for 2025, and –$2.20 for 2026.

Updated Price Target

Despite keeping a Neutral rating, Goldman Sachs raised Rivian’s 12-month price target from $10 to $12. This upward revision reflects the improved free cash flow and stronger balance sheet resulting from the Volkswagen investment. The valuation now utilizes a 2.5x multiple on projected Q5-Q8 revenue, compared to the previous 2x multiple. This signifies an adjusted valuation view that considers the strengthened financial foundation of the company.

Wedbush’s Optimistic View

In contrast to Goldman Sachs’ Neutral stance, Wedbush analysts, led by Dan Ives, express a much more optimistic view. They see Volkswagen’s increased investment as a **”pivotal boost”** for Rivian, emphasizing its importance in stabilizing the company’s finances and enhancing production capabilities. Wedbush believes that the joint venture is a crucial step towards financial stability and improved production efficiencies for Rivian.

Conclusion

The increased investment from Volkswagen undeniably strengthens Rivian’s financial position and underscores the value of its technology. However, the path towards profitability in the highly competitive EV market is still fraught with uncertainties. While Goldman Sachs’ cautious approach reflects the market’s overall volatility and inherent risks, the partnership with Volkswagen signifies a long-term investment in Rivian’s potential and its technological innovation. Only time will tell whether this crucial partnership delivers the anticipated results and justifies a more bullish outlook.

Price Action: At the last check on Thursday, RIVN stock was down 11% at $10.71.