Why Rivian Stock Could Be a Smart Buy Before February 20

Rivian's (NASDAQ: RIVN) stock has experienced notable fluctuations over the past year, trading between $8 and $20. Despite this volatility, it is important to recognize that Rivian, an electric vehicle (EV) manufacturer, holds significant growth potential in the long term. The upcoming month could mark a pivotal moment for the company with one of its most critical announcements.

If you are on the lookout for growth stocks that promise considerable upside, Rivian may fit well into your portfolio. However, there are key factors to understand before investing.

Understanding Rivian’s Low Stock Price

Like many publicly traded companies, Rivian regularly discloses its financial performance to investors every quarter. However, not all of these reports carry the same weight. Since its public debut in 2021, Rivian's annual sales soared from several hundred million dollars to over $4.5 billion. That said, the company is still facing challenges, particularly in terms of profitability, as its gross profit from selling EVs has remained negative. Despite selling billions in vehicles over the past year, Rivian has incurred a gross loss nearing $2 billion.

Short-term losses are not uncommon for many companies and can result from one-time expenses during a particular quarter. Nevertheless, Rivian has been facing gross losses over several years. Although its revenue growth has stabilized margins somewhat, the ongoing losses for each vehicle sold remain a significant concern.

Looking forward, Rivian has plans to introduce three new vehicle models starting in 2026. These mass-market vehicles, which will be priced under $50,000, could potentially catalyze a sales surge. However, launching these models will require substantial investments, and given that Rivian struggled to achieve profitability even on vehicles priced around $100,000, investors may find it challenging to trust the company’s future profit potential.

This uncertainty regarding Rivian's ability to achieve long-term profitability is reflected in its current market valuation. The company's stock trades at only 3.2 times its sales, which is significantly lower compared to competitors like Tesla and Lucid Group, which trade at approximately 10 and 14 times sales, respectively. Notably, while Lucid is also unprofitable, it generates only a fraction of Rivian's revenue. The sustained losses at Rivian despite its current scale enhance investor skepticism regarding its future profitability, even in a high-demand market.

What to Watch for in Rivian's Upcoming Earnings Report

The significance of February 20 cannot be overstated. On this date, Rivian will unveil details that may significantly impact its stock valuation.

Earlier in 2024, Rivian's management surprised stakeholders by announcing the expectation of achieving gross profitability by the conclusion of the fiscal year. They have shown progress toward this goal, as evidenced by a decrease in gross losses, down to $392 million last quarter compared to $477 million a year earlier. However, the narrowing of losses was accompanied by a drop in overall sales, which raises questions about sustainability since Rivian incurs losses on each vehicle sold.

Even with a recent gross loss of nearly $400 million, Rivian’s leadership asserts its commitment to profitability. During the last earnings call, CEO RJ Scaringe emphasized that the company aims to reach "modest positive gross profit" by the fourth quarter of this year. Achieving this milestone would dramatically improve Rivian's standing in the competitive EV market, transitioning it from a firm plagued by losses to one capable of scaling revenue profitably.

This remains a challenging road ahead, but Rivian's management team remains optimistic. If you seek growth stocks with the potential for immediate benefits, Rivian could be a strong candidate. Anticipate a possible surge in its valuation if the next earnings report indicates positive gross profits.

Rivian, Stock, Growth