Rivian Automotive(NASDAQ: RIVN) shares have traded sideways for years, even though there has been plenty of volatility along the way. Surprisingly, the company's sales have grown tremendously over that time. Two years ago, Rivian stock traded roughly where the stock trades today, and yet revenue has more than doubled since then.
In my view, the main issue hasn't been company missteps, but a simple mispricing of the stock by the market. In 2023, shares traded as high as 8 times sales. Today, shares are valued at just 3.2 times sales. So while sales have increased tremendously, the price the market is willing to pay for those sales has dropped in turn, resulting in very little net profit for shareholders.
But here's the thing: Rivian is about to experience a huge resurgence in growth, even though shares are priced at a historical discount. This could be a great opportunity now to buy shares for under $20.
How much will Rivian grow sales in 2025 and 2026?
According to analysts, Rivian is expected to grow sales by just 5.4% in 2025. Looking ahead to 2026, around 39% sales growth is expected -- a sizable jump. Why do analysts expect such lackluster growth this year, but then a noticeable spike in growth next year? It all comes down to one factor: new vehicle launches.
This year, Rivian's management team is trying to support struggling sales growth through new leasing programs and viral marketing campaigns. Structurally, however, the company simply isn't set up for much growth. It only has two vehicles in its lineup -- the R1S and R1T -- both of which cost between $70,000 and $100,000 depending on options. This high end of the market has never been huge.
Just look at Tesla. It has four premium models in its lineup: the Roadster, Model X, Model S, and Cybertruck. Yet out of the nearly 1.8 million cars it sold last year, roughly 1.7 million came from its Model Y and Model 3 vehicles -- both mass market models with affordable starting prices of under $50,000.
Put simply: Rivian needs to introduce new models to spur growth, preferably ones that cost under $50,000. Fortunately for investors, that's exactly what management expects to achieve in 2026, when it begins shipping three new affordable models to the public: The R2, R3, and R3X.
How much growth could these new affordable models add for Rivian in the long term? Analysts expect 39% sales growth in 2026 thanks to these model introductions. But timelines often get delayed, and the company may begin by shipping just the R2 next year. This means that 2027 and 2028 could result in the biggest growth rates over the coming years.
Tesla began shipping its Model 3 in 2017, with shipments of the Model Y starting in 2020. From 2017 through 2023, Tesla's sales soared by 480% -- one of its biggest growth spurts in history, nearly all of which was fueled by these new models. If Rivian achieves the same sales arc, its annual revenue would zoom from $5 billion to nearly $30 billion. At the current price-to-sales multiple of 3.2, that would imply a total market cap of almost $100 billion -- a huge increase from today's $17 billion valuation.
But before you commit to Rivian stock, there's one risk you should understand.
Image source: Getty Images.
Before you buy, monitor this 1 critical risk
Getting all these vehicles to market will take a lot of capital. Even with $9.3 billion in cash left, it's possible that Rivian will need to tap the market again to fund its scaling efforts. There is also, of course, execution risk. The R2 model was originally supposed to be released in 2025, a timeline that has since been pushed to early 2026. If the EV industry's history is any indication, Rivian's new models will make it to market later than expected, and possibly at higher price points than expected.
The biggest risk, however, is simply a lack of catalysts. As mentioned, Rivian's major sales growth may not occur until 2027 or 2028, when all three models have been released, with production capacities scaled and marketing efforts in full force. As an investor, this likely means sitting through long stretches of minimal news, periods in which shares could experience heavy volatility, as evidenced by the last few years of trading history.
Rivian has a lot of long-term potential upside with shares trading under $20. But the biggest risk is likely a matter of psychology. That is, you may not be able to commit to the long holding period necessary to see long-term profits.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
