What's going on with Rivian stock (RIVN)? – Rivian Automotive (NASDAQ:RIVN)

Shares of Rivian Automotive Inc RIVN rose about 2.25% to $13.19 on Thursday afternoon, after The Federal Reserve unexpected decision on Wednesday to cut interest rates by 50 basis points at the September meeting Federal Open Market Committee (FOMC) meet.

The rate cut will bring the benchmark interest rate down to a range of 4.75 to 5 percent. It is the first cut in over four years and signals a more aggressive monetary easing cycle than previously expected.

This change in course has significant implications for Rivian, a leading electric vehicle (EV) manufacturer, and its investors, who are now more optimistic about the company's financial outlook and growth potential.

Lower borrowing costs are expected to drive Rivian’s expansion

As a capital-intensive company, Rivian relies heavily on external financing to scale its operations, expand production capacity, and develop new technologies. The larger-than-expected rate cut reduces Rivian's future borrowing costs, which is critical for a company still in its growth phase.

Lower interest rates make it cheaper for Rivian to finance important initiatives, such as expanding its manufacturing facilities, particularly its flagship plant in Normal, Illinois, and increasing production of its R1T Electric pickup and R1S off-road vehicle.

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With the US Federal Reserve forecasting further interest rate cuts in the coming years, bringing the benchmark interest rate down to 2.9 percent by 2026, Rivian is likely to benefit from a prolonged period of favorable financing conditions.

Lower capital costs improve the company's ability to finance large investments in EV infrastructure and battery development, both of which are critical to maintaining the company's competitiveness in the rapidly evolving EV market.

Increased consumer demand for Rivian electric vehicles expected

Beyond Rivian's corporate financing, lower interest rates are likely to boost consumer demand for electric vehicles. With auto loan costs likely to fall along with Fed rate cuts, consumers could afford to buy more expensive electric models like the Rivian R1T and R1S.

With the growth of the electric vehicle industry and consumers increasingly favoring greener alternatives, Rivian is well positioned to capture a larger market share.

In addition, lower interest rates could lead to a broader economic recovery, potentially increasing consumer disposable income. This macroeconomic improvement is consistent with Rivian's long-term goal of increasing sales volume and market penetration, especially as the company adjusts its production to meet growing demand.

Also read: Wall Street breaks records, chipmakers gain, Tesla hits 2-month high as Fed rate cut boosts risk appetite: What's driving markets on Thursday?

Is RIVN a good stock to buy?

An investor can make several decisions when deciding whether a stock is a good buy. In addition to valuation metrics and price movements, which you can find on Benzinga's price pages — such as Rivian Automotive's page — there are factors such as whether a company pays a dividend or buys a large portion of its shares each quarter.

These programs are called capital allocation programs. Rivian Automotive doesn't pay a dividend, but it clearly has some ways to provide value to shareholders. Feel free to search Benzinga's Dividend Calendar for the next company to pay a dividend and find out what kind of yield you can get from a share of the company.

Buyback programs are, of course, different and highly variable. A company can authorize a buyback program and purchase shares at its discretion over the period the buyback is authorized. A look at the latest Rivian Automotive news often reveals whether or not the company has recently authorized a buyback program. Buyback programs typically serve as a support for the stock price and a backstop for demand.

According to data from Benzinga Pro, RIVN has a 52-week high of $24.87 and a 52-week low of $8.26.