3 Reasons to Buy Rivian Stock Like There's No Tomorrow

Rivian Automotive (NASDAQ: RIVN) is not an investment that conservative investors should be looking at right now. However, aggressive investors might find the upstart electric vehicle (EV) maker of particular interest as 2024 draws to a close. Here are three reasons why investors willing to shoulder a risky investment might want to consider buying Rivian stock today.

1. Rivian may be close to a positive gross profit

The big financial goal for 2024 is to post a "modest gross profit" in the fourth quarter. At the end of the third quarter, the company believed it was still an achievable goal despite supply chain issues that have hampered its ability to make trucks.

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Gross profit is very different from earnings, so this is just a step on the path to getting out of the red. However, it means that the revenue the company generates from the sale of vehicles is finally enough to pay for the vehicles it makes.

Image source: Rivian.

That's a very big shift for Rivian, which at one point was losing money on every vehicle it sold before taking into consideration research and development costs, and general business expenses. Assuming the company does post a modest gross profit, it means that there is a very real potential for it to ramp up production and cover its other costs. It can also attempt to reduce the other costs further down the income statement to help the process along.

To be fair, Rivian is still likely to need more time before it is in the black. But the EV maker achieving a gross profit is a big achievement. It also shows that the company is capable of hitting the targets it lays out, even if the target ends up shifting into early 2025. That's the type of thing you want to see a company doing.

2. A foundational relationship with Amazon

One key factor that differentiates Rivian from other EV start-ups is that it has a contract to produce delivery vehicles with online retailer Amazon. Although Rivian clearly needs to build a larger business than just selling trucks to one company, Amazon is a large customer whose business provides a solid foundation on which to build consumer-targeted trucks.

You can argue that the Amazon relationship is already baked into Rivian's stock price and future prospects, given that this isn't a new fact. However, this partnership shouldn't be underestimated. Rivian experienced supply chain issues in 2024 that limited its ability to make certain products.

In the face of that headwind, it shifted to producing the trucks it could produce without the parts it was having trouble getting. As noted in the company's third-quarter shareholder letter, "We expect to produce more Tri-Motors and commercial vans as a mitigating factor to the supply constraint, with Amazon increasing its delivery order of vans in the fourth quarter of 2024."

Basically, Amazon stepped in to help Rivian. Having a friend like Amazon is a definite positive that shouldn't be ignored.

3. A growing partnership with Volkswagen

One big problem that every money-losing start-up company has to deal with is ensuring that there is enough cash available to pay for the costs required to continue building the company.

Rivian has about $5.4 billion in cash on its balance sheet. However, that figure is down from nearly $7.9 billion at the start of the year. It costs a lot of money to build a company, particularly one in a capital-intensive business like autos. Add in the R&D needed in the still-developing EV space, and shareholders need to keep a close eye on Rivian's balance sheet at all times.

That said, Rivian has a relationship with Volkswagen that was expanded earlier in 2024. In total, over a number of years, Volkswagen will provide an additional $5 billion of cash to Rivian. Basically, Rivian is going to provide its EV technology to Volkswagen for use in that company's cars. So not only does this relationship provide Rivian with much needed cash today, but it will likely lead to a long-term customer tomorrow.

Rivian has promising prospects, but understand the risks

There are some very good reasons to believe Rivian has what it takes to become a material force in the EV market, notably including key partnerships with Amazon and Volkswagen. It is also making clear strides toward profitability, with a modest gross profit expected in the fourth quarter of 2024. If it can keep hitting key milestones like that, leveraging its partnerships to grow the business, Rivian could end up being a very attractive investment.

That's the glass-half-full view, however, because there is still the very real possibility that Rivian stumbles along the way. The EV market is littered with business ideas that sounded great but didn't pan out. So far, it looks like the Rivian story will be different. But go in knowing that there are potentially big rewards here and that there are big risks, too.

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. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.