Is Rivian Stock a Buy Before Feb. 20?

As Rivian Automotive (RIVN) prepares to report its fourth-quarter and full-year 2024 earnings on Feb. 20, investors are wondering if the electric vehicle (EV) maker's stock is a buy. With a market cap of $12.74 billion and an enterprise value of $12.04 billion, Rivian has faced challenges in achieving profitability, but its recent progress and upcoming product launches could make it an attractive investment opportunity.



Rivian's stock price has been volatile, with a 52-week price change of -19.81%. However, the company's recent progress, such as its partnership with Volkswagen and its plans to launch new, more affordable models, has investors optimistic about its future prospects. In this article, we'll explore the key financial metrics, new product launches, and potential risks to help you make an informed decision about whether to buy Rivian stock before Feb. 20.

Key Financial Metrics to Watch

1. Gross Profit Margin: Rivian has stated that it expects to achieve a modest positive gross profit in the fourth quarter of 2024. Investors should closely monitor the gross profit margin to see if the company has indeed reached this milestone. Gross profit margin is calculated as (Gross Profit / Revenue) x 100. In the third quarter of 2024, Rivian reported a gross loss of $392 million, which was an improvement from the $477 million loss in the same quarter of the previous year. Investors should look for a positive gross profit figure in the upcoming report to indicate that Rivian is on track to become profitable.
2. Revenue Growth: Rivian's revenue growth is crucial for the company to achieve economies of scale and reduce its per-unit production costs. In the third quarter of 2024, Rivian's revenue was $1.2 billion, up from $1.1 billion in the same quarter of the previous year. Investors should look for continued revenue growth in the upcoming report to ensure that Rivian is expanding its customer base and increasing its production volume.
3. Operating Expenses: Rivian's operating expenses, including research and development, sales, general, and administrative expenses, should be closely monitored. As Rivian scales its production and expands its product offerings, it is essential that the company can control its operating expenses and avoid diluting its gross profit margin. In the third quarter of 2024, Rivian's operating expenses were $1.4 billion, up from $1.2 billion in the same quarter of the previous year. Investors should look for a slowdown in the growth rate of operating expenses in the upcoming report to indicate that Rivian is becoming more efficient.
4. Cash Flow: Rivian's cash flow from operations is a critical metric for investors to assess the company's financial health and its ability to fund its growth initiatives. In the third quarter of 2024, Rivian generated $1.1 billion in cash flow from operations, up from $800 million in the same quarter of the previous year. Investors should look for continued improvement in cash flow from operations in the upcoming report to ensure that Rivian has the financial resources to invest in its growth and achieve profitability.



New Product Launches and Partnerships

Rivian's new product launches and partnerships are expected to significantly impact its growth trajectory and valuation in the long term. Here's how:

1. New Product Launches:
- Rivian plans to launch three new vehicle models starting in 2026, which will be priced under $50,000, targeting the mass market. This is a significant shift from its current high-end consumer models and work trucks.
- These new models will be based on Rivian's new mid-sized vehicle platform, which will allow for economies of scale and lower production costs.
- By expanding its product offerings to include more affordable vehicles, Rivian will be able to tap into a larger market, potentially leading to increased sales and revenue growth.
2. Partnerships:
- In November 2024, Rivian announced a $5.8 billion joint venture with Volkswagen to work together on software and electronics in their respective vehicles. This partnership will provide Rivian with a much-needed cash infusion and help both companies unlock economies of scale in their vehicle electric systems.
- The partnership with Volkswagen could also lead to additional revenue streams for Rivian, as it may supply its software and electrical architecture to other automakers through this joint venture.
- Additionally, Rivian's partnership with Amazon, which has been an important one for the company, is expected to continue to drive growth in its business-to-business segment.

Potential Risks and Mitigation Strategies

Rivian faces several potential risks and challenges in the coming years. Investors can mitigate these risks through diversification and other strategies. Here are some key risks and mitigation strategies:

1. Financial Risks:
- Rivian is currently unprofitable and is not expected to become profitable in the next three years. This financial instability could lead to a decrease in stock price and potential investment losses.
- Mitigation: Diversify your portfolio by investing in a mix of profitable and unprofitable companies to balance risk. Additionally, consider setting stop-loss orders to automatically sell the stock if it falls below a certain price, limiting potential losses.
2. Market Volatility:
- RIVN's stock price has been volatile over the past year, with a 52-week price change of -19.81%. This volatility can lead to significant gains or losses for investors.
- Mitigation: Allocate a portion of your portfolio to less volatile investments, such as bonds or established blue-chip stocks, to reduce the overall impact of market fluctuations on your portfolio.
3. Regulatory Risks:
- Changes in EV regulations, such as the elimination of EV tax credits, could negatively impact Rivian's business model and stock price.
- Mitigation: Stay informed about regulatory changes and their potential impact on Rivian's business. Diversify your portfolio to include companies that may benefit from regulatory changes or have alternative business models.
4. Competition:
- Rivian faces intense competition from established automakers and other EV startups, such as Tesla, Lucid, and VinFast. Increased competition could lead to lower market share and reduced profitability for Rivian.
- Mitigation: Invest in a diversified portfolio of EV companies to spread risk across multiple players in the market. Monitor the competitive landscape and adjust your portfolio accordingly.
5. Technological Risks:
- As an EV startup, Rivian relies heavily on technology for its products and services. Technological failures or setbacks could negatively impact the company's operations and stock price.
- Mitigation: Stay informed about Rivian's technological advancements and any potential setbacks. Diversify your portfolio to include companies with complementary technologies or different business models.
6. Dependence on Key Customers:
- Rivian's business model relies heavily on partnerships with companies like Amazon. A loss of these partnerships could significantly impact Rivian's revenue and profitability.
- Mitigation: Monitor Rivian's key customer relationships and diversify your portfolio to include companies with diverse customer bases and revenue streams.

In conclusion, Rivian's upcoming earnings report on Feb. 20 will be crucial for investors to assess the company's progress towards profitability and make informed decisions about whether to buy its stock. By focusing on key financial metrics, new product launches, and potential risks, investors can better evaluate Rivian's investment potential and make more informed decisions. Diversification and risk management strategies can help mitigate potential risks and ensure a more balanced portfolio.