Electric vehicle (EV) manufacturer Rivian RIVN has enjoyed the spotlight after inking a groundbreaking deal with Volkswagen VWAGY, but the shine from the investment appears to be fading. Indeed, RIVN stock is down approximately 7% as of this afternoon. Still, UBS analysts have expressed a warming sentiment for the EV specialist.

According to StreetInsider, UBS just raised its price target of RIVN stock to $17, up from a previous per-share target of $10. Nevertheless, data from TipRanks reveals that the firm still carries a hold rating on Rivian. Currently, the overall assessment for shares is a moderate buy, based on 12 buy ratings, nine holds and two sells.

This relative pensiveness is interesting due to a major shakeup in the automotive industry recently. Earlier this week, Volkswagen announced that it would invest up to $5 billion in the EV company alongside a joint technology venture.

As Reuters reports, the lead-up to the deal also represented a closely guarded secret. That the two companies were able to keep details under wraps until the announcement is an accomplishment in and of itself.

RIVN Stock Is Compelling But Risky

For the German auto giant, the venture gives the company access to low-cost, high-performance EV technology that traditional automakers have struggled to master, per Reuters. In 2020, Cariad which is Volkswagens automotive software unit attempted to build an EV system that would rival Tesla TSLA. Unfortunately, though, the effort has been riddled with delays and losses.

Fundamentally, the hope is that the Rivian-Volkswagen deal can accelerate the latters EV initiatives. On the other hand, the venture provides Rivian the financial lifeline it needs to survive a sharp slowdown in EV demand, build its less expensive R2 SUVs and, it hopes, turn profitable.

Building the R2 and releasing it on schedule will likely be crucial for RIVN stock. As InvestorPlaces Dana Blankenhorn notes, the R2 SUV which will be priced starting at $45,000 could be a make-or-break product.

On paper, the decision to address the middle-income buyer sounds appealing. Mathematically speaking, there are more average-income consumers then there are of the higher-income variety. Nevertheless, going down the household earnings spectrum increases the likelihood that said buyers will actually use the vehicle for everyday mobility needs.

That framework only increases the need for adequate public charging. While Rivian is building out its own network of fast chargers, its largely a domain outside the companys core specialty.

On the date of publication, Josh Enomoto 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 InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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