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Why This Analyst Says Aptiv (APTV) Stock Is the Biggest Loser on Rivian-Volkswagen Deal

It’s been a wild and wacky day in terms of big announcements in the electric vehicle (EV) sector. Rivian (NASDAQ:RIVN) just received a $1 billion investment from Volkswagen (OTCMKTS:VWAGY), which could become as much as $5 billion over time. However, for investors in Aptiv (NYSE:APTV), this news hasn’t been a net positive. Currently, APTV stock is down more than 10% on the news.

As a third-party company providing core electrical architecture such as onboard computers and software for EVs, this potential joint venture between two major automakers to do just that may completely undercut Aptiv’s value to the sector.

Interestingly, an analyst covering the company put forward in a piece that he believes companies are starting to realize the need to “configure their own electrical architecture, design their own onboard computers, and write their own code.” Given that’s what Aptiv does, this could lead to slower growth ahead and is already leading to downgrades from analysts.

Let’s dive into what to make of this deal and how it may affect Aptiv moving forward.

APTV Stock Sinks on Rivian/Volkswagen Deal

Companies like Rivian and, to a certain extent, Volkswagen have certainly felt the pressure from investors to ramp up production and hit or exceed their pre-set targets. It does appear that Rivian is looking at any way possible to bring more of its development process in-house. This move made by both automakers could signal a shift in the industry, and it is certainly not bullish for Aptiv shareholders.

For Rivian, this move appears to make sense. There’s some clear value being created for both companies. More in-house production and internal development should benefit both companies in the long term from a margin and production standpoint. If Rivian and Volkswagen can figure out this piece of the production puzzle, these companies could have a unique competitive advantage relative to other automakers.

So, for now, this downgrade to sell from hold on APTV stock certainly makes sense. I think more analysts are likely to follow suit, and Aptiv will likely need to show increased value to automakers in order for its growth forecasts to be hit.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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