Rivian's Stock Faces Challenges Despite Potential Upside

Rivian shares trade below $20, significantly down from their peak. The EV maker faces hurdles like declining sales growth and lack of profitability, yet has potential with upcoming mass-market vehicles. Investors await whether Rivian achieves positive gross margins soon.

Date: 13-01-2025

AI Rating: 5

Overview of Rivian's Current Situation

Rivian Automotive (NASDAQ: RIVN) has seen its shares stagnate under $20, a stark contrast from an all-time high of approximately $130. This signifies a potential opportunity for investors if the company can navigate its current challenges effectively.

Sales Growth

The report indicates that Rivian is experiencing negative sales growth, a worrying trend against a backdrop of historical growth rates that were often in double digits. Specifically, sales dropped by one-third in the last quarter, which is problematic when compared to competitors like Lucid Group, which grew sales by 45%.

Profit Margins and Profitability Issues

Currently, Rivian is facing significant challenges regarding profitability. The report highlights that Rivian continues to lose money on every vehicle sold, a stark contrast to Tesla's ability to maintain positive gross margins. During the last quarter, Rivian had a negative gross profit of $392 million, representing substantial losses for the company. The concern lies within its inability to demonstrate a path to profitability, which is critical for investors.

Future Prospects

Despite these headwinds, there are optimistic signs for Rivian's future. The anticipated launch of three new mass-market vehicles in 2026, priced under $50,000, could diversify its offerings and significantly improve sales. Furthermore, the CEO's assertion that Rivian is on track to achieve positive gross margins by the end of the current fiscal year could bolster investor confidence. Demonstrating positive gross margins in the upcoming quarter could significantly elevate Rivian's valuation multiples and make its current stock price attractive under $20.

However, skepticism persists due to Rivian's current valuation and negative sales growth. Investors will need to see concrete results in terms of sales and profitability before fully regaining confidence in Rivian's stock potential.

Stocks: RIVN TSLA LCID