HERE IS HOW TO PROFIT FROM VOLKSWAGEN INVESTMENT IN EV MAKER RIVIAN – CHANGING EV LANDSCAPE

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By Nigam Arora & Dr. Natasha Arora

The job of an investor and trader is to profit from the news.  The news of investment by Volkswagen (VWAGY) in EV maker Rivian (RIVN) has provided such an opportunity.

Start by understanding that there are three parts to the investment:

  • There is a $1B initial investment.

  • Volkswagen may make a total of $5B investment in Rivian.

  • The two companies will set up an equally owned joint venture focused on software and architecture.

The Trade

Please click here for a chart to understand the trade.

Note the following:

  • The chart shows the Arora buy zone provided a nice entry.

  • The chart shows that the stock quickly ran up after the entry.

  • The Arora rule is to take partial profits when there are quick profits.  Quick profits are like a gift horse.  It is never a good idea to look a gift horse in the mouth.

  • The chart shows when a signal was given to take partial profits.

  • To maintain discipline in trading, along with the initial buy signal, The Arora Report gives a target zone, stop zone, and recommended quantity.

  • In the case of RIVN, two target zones were given.  The chart shows the first target zone of $18.03 – $20.

  • The chart shows that the stock quickly reached the first target zone.

  • When a stock reaches the first target zone, the Arora rule is to take full or partial profits, depending upon personal preference.

  • For those deciding to hold a small quantity for the second target zone, the Arora rule is to move up the stop to protect profits.

  • In the case of RIVN, a signal was given to move the stop to break even.

  • RIVN has a very high short interest of 18.58% of the float.  Such high short interest increases the potential of a vicious short squeeze.

  • The second target zone is $22 – $24.  The second target zone will be reached in the very near future only if a vicious short squeeze takes place.

  • Since the trade is now in the profit taking mode, the prior buy zone is no longer valid.

  • Another buy signal will be given when the ZYX Change Method criteria are met.

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Key Points

Here are the key points that investors need to keep in mind:

  • Always distinguish between a trade and an investment.

  • At this time, RIVN is a trade and not an investment.

  • In the future, a signal may be given on RIVN for an investment, but it will be a separate signal from a short term trade.

  • Rivian came to prominence because of an investment from Amazon (AMZN).

  • Rivian is cash hungry.  In The Arora Report analysis, Rivian will need about $8B cash over the next three years.  Amazon has not been keen on making new investments in Rivian, so Rivian has needed a new sponsor.  Volkswagen is a great sponsor.  This is a positive for the stock.

  • The way the Volkswagen deal is structured, it is an efficient way to raise capital.  However, prudent investors need to be mindful that about $3B worth of investment will be highly dilutive.

  • Investors need to look at all of the foregoing from the lens that EV demand is slowing at a time when EV production capacity has sharply increased.

  • China has dramatically increased EV production capacity, and Chinese EVs are cheap.  For the time being, a potential flood of Chinese EVs to the U.S. has been stopped due to high tariffs.

  • Chinese made Tesla’s (TSLA) have been flooding the Canadian market.  Now, Canada is also raising tariffs on Chinese EVs.

  • Europe is also raising tariffs on Chinese EVs.  European car makers such as Volkswagen, BMW (BMWYY), and Mercedes (MBGYY) are against high tariffs because these companies sell a lot of cars in China.

  • Europe and China are about to enter negotiations on tariffs.

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Tesla

Release of Tesla production numbers is ahead.  In The Arora Report analysis, Tesla will have difficulty meeting the optimistic numbers that are in the market.  Having said that, there is a floor under TSLA stock on investor optimism about the upcoming robotaxi announcement in August.  For those who want next level information on robotaxis, listen to the podcast titled “Robotaxis May Be The Biggest Artificial Intelligence Play.

Opportunities

As discussed above, the landscape for EVs is changing.  A changing landscape always provides opportunities both from the long side and the short side.  At The Arora Report, we keep a close eye on the change.  The premise behind the ZYX Change Method is that the most money is made with the lowest risk by identifying change early.

Expect many more opportunities both for investments and trades in electric vehicles.

To take a free 30-day trial to paid services to gain access to more opportunities, please click here.

This post was just published on ZYX Buy Change Alert.

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Picture of Nigam Arora

Nigam Arora

Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.

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Picture of Dr. Natasha Arora

Dr. Natasha Arora

Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.

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