Could Buying Rivian Automotive Stock Today Set You Up for Life?

Rivian Automotive (NASDAQ: RIVN) attracted a stampede of bulls with its IPO on Nov. 9, 2021. The electric vehicle (EV) maker went public at $78 per share, and its stock opened at $106.75 before touching a record high of $172.01 just a week later.

At that peak, Rivian's market cap hit $153 billion, which was 92 times higher than the revenue it would generate in 2022. It briefly made the tiny EV maker more valuable than Ford or General Motors.

Image source: Rivian.

Rivian's stock initially soared for three reasons: It was backed by Amazon and Ford, it was already producing thousands of EVs, and it went public at the apex of the meme stock craze. But today, Rivian shares trade for about $10, giving it a far humbler market cap of $10 billion. That's less than 2 times the revenue it's expected to generate next year.

The bulls fled as Rivian's growth slowed, it racked up steep losses, and rising interest rates popped its bubbly valuations. Ford also ditched its plans to co-develop an electric pickup with Rivian in 2021 and liquidated most of its stake in the company in 2022. But could buying Rivian now while the market is shunning it set you up for massive gains in the future?

Why did Rivian disappoint its investors?

Rivian currently produces three models of vehicle: the R1T pickup, the R1S SUV, and a custom delivery van it sells to Amazon. Before its public debut, Rivian claimed it would produce 50,000 vehicles in 2022. Instead, it produced 24,337 vehicles, and only delivered 20,332. It blamed those disappointing numbers on supply chain constraints, the cooling growth of the EV market, and other macro headwinds across the industry.

In 2023, Rivian overcame those challenges to produce 57,232 EVs and deliver 50,122. Its growth accelerated as it resolved its supply chain problems and ramped up production of its in-house Enduro drive unit to cut costs.

But for 2024, Rivian only expects to produce between 47,000 and 49,000 vehicles. Once again, it blamed supply chain problems -- but its problems were exacerbated by the temporary shutdown of its main plant in Illinois for upgrades in April, intense competition in the EV space, and higher interest rates. It expects its full-year deliveries to land between 50,500 and 52,000 EVs.

Can Rivian finally scale up its business?

Rivian's revenue soared by 167% to $4.43 billion in 2023, but it only slightly narrowed its net loss from $6.75 billion to $5.43 billion. For 2024, analysts expect its revenue to rise by just 6% to $4.71 billion, but expect it to narrow its net loss to $4.88 billion. Those losses are steep, but Rivian still had $9.18 billion in total liquidity (including $7.87 billion in cash, cash equivalents, and short-term investments) on its books at the end of June.

Volkswagen also launched a new joint venture with Rivian in June to co-develop new EV architecture and software. As part of the deal, the German automaker plans to invest up to $5 billion in Rivian and the joint venture over the next two years. That fresh cash should provide Rivian the breathing room to bring its cheaper new R2 SUV to market in 2026, launch its higher-end R3 and R3X SUVs in 2026 and 2027, and continue to fulfill Amazon's massive order for 100,000 electric delivery vans through 2030. It also plans to start selling some of those delivery vans to other customers over the next few years.

To support its expansion plans, Rivian recently applied for a federal loan, seeking funds to resume construction on a new $5 billion plant in Georgia that could eventually triple its annual production capacity. That roadmap sounds promising, but Rivian still needs to resolve its latest supply chain bottlenecks and prove that it can scale up its business.

Unfortunately, Rivian insiders have sold nearly 86 times as many shares as they bought over the past three months, so it might take a long time for it to stabilize its shaky business and convince the market that it deserves a higher valuation. On the bright side, Amazon is still holding its stake in Rivian and remains its top investor.

Could Rivian's stock set you up for life?

Rivian's low price-to-sales ratio could make it a tempting turnaround play for value-seeking investors. If it can scale up its business in the same way Tesla did over the past decade, it could be a millionaire-maker stock from here. However, Tesla established an early-mover advantage in the EV space, was aided by more generous government subsidies, and didn't face as much direct competition during its expansion phase. It's far too early to assume Rivian could replicate Tesla's growth trajectory.

But with Rivian shares trading at these prices, the downside risk for new investors could be limited -- and it could be a worthwhile investment for aggressive speculative investors looking for long-term gains. Rivian certainly has the potential to turn a modest investment into a major asset, but its stock could also easily be cut in half again (or worse) if the company can't meaningfully ramp up EV production.

Should you invest $1,000 in Rivian Automotive right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Tesla, and Volkswagen. The Motley Fool recommends General Motors and Volkswagen Ag and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.