Rivian stock looks set to soar today! Should I buy?

Rivian stock soared in after-hours trading after a big-deal announcement. Our writer shares his view as a strategic long-term investor. Will he buy?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Road trip. Father and son travelling together by car

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Things have suddenly got very exciting for Rivian (NASDAQ: RIVN). Its stock leapt 9% in yesterday’s (25 June) trading session in New York. That still leaves it over 90% down since its 2021 listing.

Once the markets closed though, the price soared. In pre-trading today it is up a phenomenal 38%. What on earth is going on – and should I get some of the action?

Major partnership announced

Electric vehicle (EV) maker Rivian has been bleeding cash. Last year, the firm delivered a little over 50,000 vehicles. Revenue was a not-insubstantial $4.4bn.

Should you invest £1,000 in Scs Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Scs Group Plc made the list?

See the 6 stocks

But the net loss, although reduced from the prior year, still came in at a still-painful $5.4bn. Free cash outflow was $5.9bn.

Yes, the company is selling thousands of vehicles and, yes, those sales are set to grow strongly in coming years. But it is massively lossmaking and is burning through cash like a drunken sailor.

Enter the polar opposite of a drunken sailor… a large, sober, proven German corporation. Specifically, Volkswagen. Yesterday, it was announced the giant carmaker and Rivian are entering a joint venture.

Why investors are excited

That announcement is why the stock soared in after hours trading. It is also why I expect we will see a sharp move upwards as soon as the main market opened this morning (US time). That said, we may see wild moves both up or down in today’s New York trading session.

Created with Highcharts 11.4.3Rivian Automotive PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Why are investors so excited?

For a company burning through cash like Rivian, the prospect of any investment that improves the balance sheet can be exciting, depending on what strings are attached.

On top of that, when it comes to making and selling vehicles, Volkswagen clearly knows what it is doing. Last year, it sold 9.2m.

So for such a seasoned operator to see significant value in Rivian bolsters the sense that the EV company may really have developed something that has high value.

Volkswagen is not spending $5bn on the stock

But here’s the rub. Volkswagen is not putting its money into this stock right now – and maybe not at all.

It is setting up a joint venture with the company, which both firms will own and control equally. The announcement talked of “a total expected deal size of $5 billion”. Of that, only $1bn is likely to come soon. ”Up to $4 billion in planned additional investment” is an aspiration subject to conditions being met — not a concrete commitment to inject the money.

That $1bn will be in a form of convertible loan notes, so should convert into Rivian stock.

The other $4bn, if it ends up coming at all, will be in the form of $2bn put into the stock and the same amount split across a cash injection and loan for the joint venture.

Strategic investment perspective

I am an investor not a trader. So I would not buy the shares hoping for a short-term bounce.

From a long-term perspective, Volkswagen appears to like Rivian’s technology. I see its move as a vote of confidence from a strategic investor on the tech. That is not the same as a vote of confidence from a financial investor on the valuation of the stock. I have no plans to invest.

Should you invest £1,000 in Scs Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Scs Group Plc made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

C Ruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »