Here's Why Rivian Stock Is a Buy Before February 20

Rivian (NASDAQ: RIVN) is a high risk stock that only more aggressive investors should be looking at. But, if you are looking at it, it might be worth jumping aboard before it releases fourth quarter 2024 and full year 2024 earnings on Feb. 20. Here's why the story in 2025 is likely to be more upbeat than the one that unfolded in 2024.

What does Rivian do?

Rivian is an electric vehicle (EV) maker with a focus on trucks. At this point it really makes two types of vehicles, a high-end consumer model and work trucks for business customers. On the business side it counts Amazon (NASDAQ: AMZN) as a key partner. This relationship has been an important one for Rivian, as it is a statement to the quality of its products. That said, Rivian has won a host of awards for its consumer oriented vehicles, as well.

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Image source: Rivian.

It isn't easy breaking into a developed industry like autos, but Rivian seems like it is finding at least reasonable success in its efforts. For example, it has gone from producing no cars to around 50,000 a year. That's way less than established competitors like Tesla and certainly industry giants like Ford, but it is a large enough figure to benefit from economies of scale.

That, in fact, was the focus in 2024. Up until 2023 Rivian was working to build out its manufacturing assets. Once it achieved that goal it set about trying to work down its costs so it could make its vehicles profitably. That included shutting down its factory to retool and implement other changes that would allow for lower manufacturing costs over time. There is an important nuance here, however.

Rivian isn't focused on earnings yet

Rivian's big financial goal for 2024 is to generate a modest gross profit in the fourth quarter. That basically means that the cost of manufacturing a vehicle is more than paid for by the revenue generated from the sale of that vehicle. It is an important step toward profitability, but it doesn't mean Rivian is generating earnings because there are other expenses to consider below the gross profit line in the earnings statement. At the end of the third quarter the company claimed it was still on track for a modest gross profit in the fourth quarter.

Only, there was a fly in the ointment when it came to achieving this goal. After the factory restart Rivian faced parts shortages that forced it to lower its full-year production targets. That's not a good thing, but management was able to shift gears and lean on its relationship with Amazon to keep production going where it could while it dealt with the issue. When the company released its full-year 2024 production numbers it announced that the parts problem had been solved.

RIVN data by YCharts

No business operates in a straight line. There are always problems to deal with and being able to successfully do that is an important skill. Rivian has shown it has that skill, which should make investors a little more comfortable owning the stock. But the real takeaway is that on Feb. 20 it seems likely that Rivian will announce a modest gross profit. And even if it doesn't, this key development will likely come in early 2025. This is a notable turning point for the business that investors shouldn't ignore.

Where to from here for Rivian?

Rivian's stock has fallen dramatically from its all-time highs. But it probably isn't reasonable to expect a return to those levels given the changed thinking about EVs on Wall Street. Still, as this company continues to march forward in its ultimate goal to become a profitable EV maker, it seems likely that the shares could rise materially from where they are today. And the February quarterly earnings update will be an important one in that trek. Look for an update on the gross profit line and a deeper dive into what the company plans for 2025.

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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 and Tesla. The Motley Fool has a disclosure policy.