Rivian Automotive (NASDAQ:RIVN)
The announcement of new cooperation sent shares of Rivian Automotive (NASDAQ:RIVN) soaring Wednesday, driving the increase to nearly 11%. However, investors appear to be having second thoughts about their initial response, as evidenced by the stock’s loss of as high as 4.5% this morning. As of 11:50 this morning ET, the share price had partially recovered from the earlier decline but was still down 0.6%.
Two things could be dominating the minds of investors right now. First, Rivian Automotive (NASDAQ:RIVN) already has a market valuation of about $34 billion, which is an impressive figure. This valuation is accurate even though the company generated revenue in the first half of 2022, which was less than $500 million. Based on yesterday’s news, it would appear to be unreasonable to immediately assign a worth of more than $3 billion. In addition, the new cooperation planned with the Mercedes-Benz Van subsidiary of Daimler AG won’t result in the production of cars for several additional years.
Both the electric-only platform of Mercedes-Benz Vans and the Rivian Light Van platform will be utilized in the new joint venture that will be used to manufacture electric vans. This will make use of current Mercedes-Benz assets that are located in Europe. Amazon has ordered 100,000 electric delivery vehicles with Rivian Automotive (NASDAQ:RIVN), with deliveries spread out through 2030. Rivian is already producing electric delivery vehicles in the United States as part of this agreement.
Rivian Automotive (NASDAQ:RIVN) has more immediate demands in the short term, even though the anticipated joint venture is a piece of good news for the company. It is having difficulty obtaining the necessary parts, which has caused it to scale back its production forecast for 2022. It also used up more than $1.5 billion in cash during the second quarter alone since the company had to absorb increased raw material prices before pricing hikes on its vehicles kicked in. This caused the company’s cash reserves to be depleted.
The price increase yesterday was a little bit of an overreaction, and some investors are cashing in on the rise they saw yesterday.
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