Why Rivian Stock Surged More Than 20% in November

Rivian Automotive (NASDAQ: RIVN) didn't blow away investors with its third-quarter earnings report last month, but November was still a big month for the company and its stock. The company did reiterate some operational guidance, but parts supply issues resulting in a lower production outlook for the year forced the electric vehicle (EV) manufacturer to forecast increasing losses.

Yet the stock soared by 21.1% in November, according to data provided by S&P Global Market Intelligence. That's because the longer-term outlook for Rivian improved immensely with two announcements that will meaningfully bolster the company's capital position.

Rivian investors are thinking long-term

In its third-quarter earnings report in early November, the EV start-up told investors it still expected to deliver between 50,000 and 52,000 units in 2024. That guidance had been reduced in October, however, due to supply chain issues on certain parts.

Maybe more importantly, management held to the prediction that Rivian would generate a positive gross profit in the fourth quarter thanks to ongoing progress in reducing costs. But the supply issues still forced the company to lower its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance for 2024 by as much as $175 million. That mixed news isn't what drove the stock higher, though.

More impactful was word that global auto giant Volkswagen Group would be investing as much as almost $6 billion in a new partnership with Rivian. The investment includes $1 billion through a convertible note that would automatically convert into Rivian equity. Another $1.3 billion is a direct cash infusion to close a new technical joint venture between the two companies. The plan is then for further equity investments from Volkswagen over the next several years.

Things got even better for Rivian

That news was huge for Rivian as it helps reduce its capital needs heading into the start of production of its next-generation R2 next year. That fully electric midsize SUV is expected to start at a price of about $45,000, making it more affordable than Rivian's current lineup, and potentially more desirable for a larger customer base.

The deal also calls for Volkswagen to fund 75% of the shared platform costs in the new joint venture. Investors see the potential for other automakers to tap into Rivian's EV platform architecture in the future, too.

Investors also got a chance to envision another phase of growth for Rivian beyond the Volkswagen partnership. In late November the U.S. Department of Energy (DOE) announced a commitment for a conditional loan of up to $6.6 billion for Rivian. The DOE loan would help the company with the construction of a planned new production plant in Georgia. That plant is expected to expand the capacity for Rivian's R2 platform as well as build a future, smaller R3 SUV.

Investors now see a real path for Rivian to grow into profitability. That explains the big November move in the stock.

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Howard Smith has positions in Rivian Automotive. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.