Here's Why Rivian Stock Is a Buy Before Nov. 30

Rivian Automotive (NASDAQ: RIVN) has been an extremely volatile stock since its initial public offering in 2021. Yet volatility can often create incredible buying opportunities. After a recent correction, Rivian stock is now too cheap to ignore. And there's one major reason to buy before the end of the month. Let's dive in, and I'll explain.

Rivian says it's about to achieve this major milestone

The electric vehicle (EV) maker has had a lot of success since launching its first two luxury models: the R1T and R1S. Sales have zoomed from just $1 million in September 2021 to more than $5 billion today.

This sales trajectory could continue with the launch of three new mass market vehicles: the R2, R3, and R3X. Unlike Rivian's higher priced current models, these are expected to debut under $50,000. That could push the company to another stage of sizable growth, similar to what the Model 3 and Model Y did for Tesla.

And yet, compared to other EV makers like Tesla and Lucid Group, Rivian trades at a sizable discount, according to several valuation metrics. For example, it trades at just 2.2 times sales -- Lucid and Tesla trade at 6.5 and 12.3 times sales, respectively. If Rivian traded in line with these peers, there would be 200% to 600% in potential upside.

And right now, there's one near-term catalyst that could close the gap quickly. One of the reasons the market remains skeptical is that the company keeps losing tens of thousands of dollars for every vehicle it sells. This means that while sales growth has been impressive in recent years, net losses continue to mount.

That's also true for other smaller EV manufacturers like Lucid, but scaled-up competitors like Tesla have achieved positive gross margins for years. In an industry rife with bankruptcies, the market clearly wants to see Rivian achieve gross profitability before assigning it a higher valuation, especially given that its sales growth has slowed considerably over the last year.

You wouldn't know it by Rivian's dirt-cheap valuation, but the company is poised to flip to gross profitability very soon. If you listen to what management has promised, it should happen this quarter. Should that come to pass, there isn't much time before this potential becomes a public reality.

Last quarter, Rivian lost around $39,000 per vehicle. That's up from $32,700 the quarter before. And yet this month, management reiterated that the company was on track to achieve positive gross margins by next quarter. That would be an incredible feat, and the market is reasonably skeptical. But there's no doubt that Rivian's share price will likely react very positively should this milestone be reached.

RIVN PS ratio data by YCharts; PS = price to sales.

Don't buy this stock just for near-term results

Make no mistake, Rivian is not a stock for short-term investors. If the company fails to achieve positive gross margins next quarter, the market could lose even more faith in it, especially given that general sentiment for EV stocks remains low right now relative to boom years like 2021.

To invest in Rivian today, you need to be happy with either future. If the company achieves positive gross margins, that's a huge vote of confidence for its management and for its ability to survive for long enough to ship its mass market vehicles in 2026 and 2027. But if management is incorrect in its predictions, and the stock sells off, you have to be excited about picking up more shares at a discount.

Customer loyalty surveys by media outlets like Consumer Reports already suggest that Rivian is able to make vehicles that customers love. And getting EVs to market priced under $50,000 proved to be a huge lever of growth for Tesla. I expect the same to occur for Rivian if it can survive financially until these models hit the road.

Positive gross margins would significantly improve the odds that it reaches that crucial milestone, but its partnerships with deep-pocketed investors including Amazon and Volkswagen mitigate some of those financial concerns.

In either case, aggressive growth investors should be taking a close look at Rivian before next quarter's results are released. Just be prepared to double down should expectations fail to match reality. Otherwise, this stock is likely not for you.

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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.