Rivian Sees Big Turning Point. Is It Time to Buy the Stock?

Rivian Automotive (NASDAQ: RIVN) has had no trouble selling its popular electric vehicles (EVs) since the company went public back in 2021. What it had been unable to do was sell its trucks and SUVs for more than it cost to make them. That all changed in 2024's fourth quarter when the company finally posted a positive gross margin.

That was a big accomplishment, and it puts the young company on the road to becoming a more sustainable business. However, it still has a long way to go, and 2025 is likely to be both a transitional and transformative year. With that in mind, is this a good time to buy the stock?

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Positive gross margins

That first-ever quarterly gross profit Rivian just turned in was a modest $170 million. Its gross margin rate in Q4 was 9.8% compared to negative 46% a year ago. It generated $110 million in gross profits from its automobile segment and $60 million for its software and services segment. Q4 automotive segment margins were 7%, while software and service margins were 28%.

The company said it was able to reduce the cost of manufacturing its EVs by $31,000 per vehicle year over year. One of the biggest factors was that it lowered its material costs, including through its new zonal architecture, which significantly reduced the number of electronic control units and the amount of wiring in its vehicles. However, the company also credited higher average selling prices and an increase in regulatory credit revenue to its ability to get to a positive gross margin.

Rivian's Q5 revenue climbed by 32% to $1.73 billion, with automotive revenue rising 26% to $1.52 billion and software and services revenue doubling to $214 million. It delivered 14,183 vehicles in the quarter, up 2% from the 13,972 it delivered in the prior year period. However, it manufactured only 12,727 vehicles -- well below the 17,541 vehicles it produced a year earlier -- as it dealt with supply constraint issues. Meanwhile, it said enhancements to its Connect+ offering -- which provides media, connectivity, Wi-Fi hotspot, and live security -- helped boost its software and services revenue.

Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) improved from a loss of $1 billion in the prior year period to a loss of $277 million this time. The company generated $1.18 billion in operating cash flow in the quarter, although it still booked an outflow of $1.72 billion for the full year.

Rivian ended the quarter with $7.7 billion in cash and short-term investments on its books against $4.4 billion in debt. Meanwhile, it closed a loan with the Department of Energy's Loan Programs Office for up to $6.6 billion to support the construction of its new manufacturing facility in Georgia. It also launched a joint venture with Volkswagen that will see the giant legacy automaker invest up to $5.8 billion in the EV upstart.

The next key steps in Rivian's transformation will be for it to start producing its more affordable R2 SUVs and building its new factory. Management said the R2's materials are 95% sourced already and that it will cost tens of thousands of dollars less than its R1S SUV models. It aims to launch the new model in the first half of 2026.

Rivian will shut down its current plant for a month this year in order to prepare for the launch of the R2. With the shutdown, the company expects to deliver between 46,000 and 51,000 vehicles this year, and is ramping up production in Q1 to build inventory ahead of the shutdown. It is looking to generate a modest full-year gross profit in 2025, with negative adjusted EBITDA of between $1.7 billion and $1.9 billion.

Management said its outlook includes hundreds of millions of dollars of negative impact to its EBITDA from regulations, tariffs, and the loss of federal incentives.

Image source: Getty Images

Is Rivian stock a buy?

Rivian is making good progress, and reaching gross margin and operating cash flow positivity were big milestones. The next big step for it will be getting its R2 SUV to market. The company expects it to have a base price of around $45,000, which should give it much more mass appeal than the R1S SUV, which starts at just under $76,000.

As Rivian builds its new factory and continues to gain scale, it's planting the seeds that could grow into eventual profitability. Its partnerships with Volkswagen and Amazon, for which it makes EV delivery vans, strengthen its financial foundation.

That said, the company is still burning through cash, and it faces potential headwinds from rising tariffs, falling federal incentives, and shifting regulations. Meanwhile, the CEO of its largest EV rival has become very influential within the U.S. government -- a unique added risk that is hard to quantify.

Rivian is headed in the right direction, but there will be some bumps along the way. The stock remains a speculative investment.

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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. Geoffrey Seiler 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.