Should You Buy Rivian Stock While It's Below $14.50?

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Ryan Vanzo, The Motley Fool

Sat, Feb 22, 2025, 6:24 PM 4 min read

Rivian (NASDAQ: RIVN) has a long way to go in terms of sales growth. But long term, it could become the next Tesla. There are many notable differences between Tesla and Rivian today, but if you crunch the numbers, it's not hard to project huge growth upside for Rivian over the next several years and beyond.

Rivian had a rough 2024, but there are two reasons why I'm more bullish than ever about its stock.

We just got some great news

As an electric-vehicle (EV) stock, Rivian's share price has gyrated wildly over the years. In 2021, EV makers were seeing their valuations soar as expectations for demand similarly climbed.

More recently, smaller EV stocks, like Rivian, have seen their share prices struggle, especially since demand growth in 2024 fell below expectations. Lofty valuations, combined with underwhelming real world results, is usually a recipe for disaster for investors.

A wildly changing valuation can pose big problems for companies that must continually rely on markets to raise new capital. Rivian undoubtedly falls into this category of businesses. Despite sales reaching $5 billion last year, the company remains unprofitable. It's extremely costly to design, manufacture, and ship new vehicles from scratch, and the company's inability to achieve profitability is a strong testament to that reality.

In 2021, Rivian had a market cap of more than $100 billion. Back then, it could easily sell stock to cover its multibillion dollar annual loses. But today, with a market cap of just $14 billion, the company is finding that raising that much capital has become a greater challenge.

Funding concerns are likely a big factor in today's valuation. With a share price just below $14.50, Rivian stock is valued at just 3x sales -- a deep discount to Tesla's 12.7x sales valuation. But funding concerns could soon be over.

This week, Rivian announced its quarterly earnings. Management had issued guidance that it expects to achieve positive growth profits this quarter -- a bold prediction. Scores of EV manufacturers have gone under over the decades, and an inability to reach profitability is a big reason for this long list of failures. But Rivian's management came through, with the company posting a $170 million gross profit this quarter.

"This quarter we achieved positive gross profit and removed $31,000 in automotive cost of goods sold per vehicle delivered in Q4 2024 relative to Q4 2023," CEO RJ Scaringe revealed on Thursday. "Our focus on cost efficiency across the business is critical for the launch of our mass market product, R2." The R2 is Rivian's next vehicle launch, which we'll talk about next. And the cost savings achieved this quarter are expected to translate well to that launch. "The R2 bill of materials is approximately 95% sourced and is expected to be approximately half that of the improved R1 bill of materials," Scaringe added."

Rivian is about to follow Tesla's playbook for growth

By achieving positive gross profits this quarter, Rivian now has a paved path for growth -- an upward trajectory that should start ramping in 2026. That's the year the company expects to begin shipping its three new mass-market vehicles -- the R2, R3, and R3X. All of these vehicles are expected to cost less than $50,000, allowing Rivian to grow its sales base like never before.

Tesla's massive growth over the years was largely spurred on by the introduction of mass-market vehicles like the Model Y and Model 3. These two models now account for more of Tesla's current sales base and were responsible for around 40% of total EV sales in the U.S. last year. Suffice it to say, introducing mass-market models is a proven recipe for massive growth.

With Rivian shares below the $14.50 mark, there should be plenty of upside ahead. That's because with positive gross margins achieved, the market should grow much more confident in the company's ability to compete long term.

This would likely improve the company's ability to tap both equity and debt markets enough to get its mass-market vehicles out to consumers. And if Tesla's history is any indication, that event would mark a long and historic growth runway for Rivian's sales base.

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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.

Should You Buy Rivian Stock While It's Below $14.50? was originally published by The Motley Fool

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