Should You Buy Rivian While It's Below $20?
Monday, Jan 13, 2025 4:55 am ET
4min read Rivian Automotive (RIVN) has been on a rollercoaster ride since its IPO in 2021, with its stock price fluctuating significantly. As of early 2025, Rivian shares are trading below $20, raising the question: should you buy Rivian while it's at this level? To answer this, let's examine Rivian's financial performance, valuation, and future prospects.
Rivian's financial performance has been mixed. In 2023, the company produced over 50,000 vehicles, more than doubling its output from the previous year. However, its delivery numbers fell short of expectations, raising concerns about demand and competition in the growing electric vehicle (EV) sector. Rivian's stock price dropped 10% on the first trading day of 2024 following the release of the delivery numbers.
Despite these challenges, Rivian has a strong product lineup and a promising future. The company's adventure-oriented electric trucks and SUVs have garnered attention for their blend of 'rugged capability' and cutting-edge electric technology. Rivian's recent developments in its R1T and R1S models showcase a compelling blend of strategic product refinement and market positioning.
Rivian's valuation is relatively low compared to other EV makers. The company trades at just 3.2 times sales, indicating significant upside potential if its valuation were to reflect those of its competitors. Rivian's market capitalization of $10.3 billion, with a price-to-sales ratio of 1.5, is relatively low for a company expected to demonstrate a 50% CAGR over the next decade.
Rivian's undervalued status can be attributed to two key factors: its negative sales growth rates and its inability to achieve profitability. These factors have been holding back the company's valuation, but there are signs that they could change in the near future. Rivian plans to launch three new mass-market vehicles in 2026, all priced under $50,000. This diversification of its product lineup could lead to a significant increase in sales, similar to what Tesla experienced when it released its mass-market vehicles. Additionally, Rivian's CEO has stated that the company will achieve positive gross margins by the end of the fiscal year, which would dramatically improve its ability to survive and grow.
In conclusion, Rivian's undervalued status, driven by its negative sales growth rates and inability to achieve profitability, presents an opportunity for investors. However, the company's plans to launch more affordable vehicles and achieve positive gross margins could change this dynamic in the near future, potentially leading to a higher valuation. If Rivian can execute on its plans and improve its financial performance, it could be an attractive investment opportunity while it's trading below $20.
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