Rivian: Buy, Sell, or Hold?

The electric vehicle (EV) market hasn't accelerated as fast as some had expected, leaving many EV stocks, including start-up Rivian Automotive (NASDAQ: RIVN), on the decline over the past few years. That puts investors in an odd position. Is now the right time to buy an electric vehicle stock, as many are cheaper than before, or is it a bad idea to bet on the nascent market?

As with most decisions in life, the answer depends. To understand what investors should do, let's look at the case for buying, selling, and holding shares based on what's happening with Rivian right now.

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Image source: Rivian.

The case for buying Rivian

I own Rivian shares and think there are a few good reasons that, collectively, make Rivian a compelling buy right now.

First, Rivian just started a joint venture (JV) with Volkswagen, which gives it access to additional cash, equity in the JV, and a potential loan, all valued at $5.8 billion over the next few years. For a company that's spending lots of money to build vehicles and launch new models (the R2 begins production in 2026), the additional capital was welcome news when Rivian announced it late last year.

It also proves that Rivian has something a well-established automaker wants. While Rivian gets cash from the JV, Volkswagen gets in-vehicle technology and electric vehicle architecture it needs for future vehicles (VW will begin incorporating Rivian tech in some 2027 models).

And then there's Rivian's focus on gross profitability. The company made some significant cuts to its production costs last year, retooling some of its vehicle production that resulted in a 35% reduction in material costs for its electric vans (which it makes for Amazon) and a similar reduction for its R1T truck and R1S SUV.

That's helping the company achieve its goal of being gross-profit-positive when it reports its fourth-quarter 2024 financial results on Feb. 20. While there's still a long road ahead for Rivian to increase revenue and narrow its losses, this will be a good first step showing the company's finances are moving in the right direction.

And finally, Rivian's shares are relatively inexpensive compared to some of its rivals. Rivian's forward price-to-sales ratio of 2.9 is a pretty good price compared to fellow EV start-up Lucid Group, with a forward P/S ratio of 9.3.

The case for holding Rivian

Some of the reasons for holding Rivian overlap with the cases for buying. But one unique angle for holding is that investors may want to see what happens with Rivian's vehicle production and deliveries.

The company's vehicle production declined by 13.5% (to 49,476 vehicles) in 2024 and vehicle deliveries rose by a modest 3% to 51,579. Part of the slowdown could be a general pullback in spending from consumers, who have opted for hybrids over EVs recently.

Another reason for the slowdown came from a shortage of components from one of Rivian's suppliers. Management recently said that the shortage is resolved, which should help production get back on track.

Rivian investors may want to hold onto their shares to see how 2025 production and delivery numbers play out, especially as Rivian prepares to launch its more affordable R2 SUV in 2026, which starts at $45,000. The new model will widen Rivian's potential customer base and make it more competitive with midpriced gas-powered vehicles.

The case for selling Rivian

The reasons for selling Rivian are essentially the same for why you might sell any stock. These generally include: the initial reason why you bought the stock has changed, you need the money for something else (e.g., college tuition or a house downpayment), you've found a better investment opportunity, or you need to rebalance your portfolio.

I'm bullish on Rivian's long-term prospects, but I also understand there may be better places to put your money right now. For example, many artificial intelligence (AI) stocks have been absolutely on fire as they tap into a fast-growing market that could be worth $15.7 trillion by 2030.

If you're a tech investor and have a significant sum invested in Rivian, it may make sense to pare back your position to open up some funds for AI. However, if you're bullish on the long-term prospects of EVs, I think Rivian is well-positioned for a bright future.

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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. Chris Neiger has positions in Rivian Automotive. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.