The Motley Fool makes its case for Rivian stock (RIVN)
Rivian stock (NASDAQ:RIVN) has fallen significantly from its all-time highs. Despite this, a recent post from The Motley Fool has argued for RIVN stock, with the publication stating that there is much potential in the electric truck maker.
It is no secret that TSLA is arguably the hottest stock in the electric vehicle sector. But while TSLA's prolific nature makes EV stocks visible, it also results in some companies like Rivian potentially getting overlooked. The Motley Fool then outlined two huge reasons why RIVN stock may be underestimated.
Reason 1: Critical milestones may be within reach
Rivian is yet to achieve a positive gross margin. This was highlighted in the previous quarter when the company essentially lost $300,000 for every vehicle it sold. Despite this, Rivian management has noted that the company could achieve a positive gross margin by the end of the fiscal year.
There are still two quarters left in Rivian’s fiscal year, so the company has some time to get its bearings. Fortunately, Rivian management seems determined to reach its self-imposed target, as the company has not walked back on its positive gross margin targets despite the notable production challenges it faced in Q3 due to supplier issues.
As per The Motley Fool, “If the company reports a positive gross margin this fiscal year, expect the stock price to move strongly on the news, as the next milestone on this list becomes significantly more likely to be realized.”
Reason 2: The potential of the R2, R3/R3X
The publication noted that about a decade ago, Tesla’s revenue base was pretty similar to Rivian’s today. Over the last ten years, Tesla has grown its revenue on the back of its two mass-market cars, the Model 3 sedan and Model Y crossover. Rivian may see a similar trend with the R2, R3, and R3X, which were unveiled this past March.
The Motley Fool did note, however, that Rivian would have to burn a lot of cash and invest a lot of resources to build the facilities it needs to design, test, market, produce, and ramp the R2, R3, and R3X. As per the publication, it may all boil down to whether Rivian could achieve gross profitability soon. If Rivian achieves a positive gross margin, investors may be more willing to see the company through its R2, R3/R3X ramp.
“If Rivian can reach gross profitability soon, the market may gain enough confidence to finance Rivian's negative cash flows until it can get these vehicles into the hands of millions of new consumers,” the publication noted.
Ready for Volatility
It should be noted, of course, that the R2, R3, and R3X will likely enter the market for several more years. And apart from the company’s positive gross margin, there might not be many major catalysts for RIVN stock for a while. With this in mind, Rivian investors may need to prepare for some volatility, particularly as the company takes on the challenge of building its mass-market cars.
“If Rivian is able to successfully launch its mass-market vehicles beginning in 2026, expect sales growth to explode, with additional launches in 2027 only adding to this sales arc… It's not hard to chart out how Rivian stock is extremely undervalued right now. But it'll be years before investors figure out whether the investment thesis is correct or not,” the The Motley Fool noted.
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