Contemplating Purchasing Rivian Stock While Its Value Remains Under $20?
Hey there! If you're considering investing in Rivian (RIVN 2.24%), you might be wondering why its shares haven't reached their all-time high of around $130 yet, despite having significant upside potential. Well, let me break it down for you.
First, Rivian's sales growth rates are currently in the negative, unlike its historical double-digit or even triple-digit growth rates. Its sales fell by one-third last quarter while competitors like Tesla and Lucid Group saw their sales bases grow. Tesla, with its diversified sales lineup, has been able to absorb shifting consumer trends, while Rivian, with only two luxury models costing around $100,000, has no cheaper options to attract more budget-conscious shoppers.
The second issue holding Rivian back is its inability to become profitable. Despite its notable strides in improving its gross margins since going public, Rivian is still operating at a loss. With a negative gross profit margin and nearly a $2 billion gross loss in the last 12 months, it's no wonder investors are skeptical.
But here's the good news: these two headwinds could soon turn into tailwinds for Rivian. In 2026, it plans on launching three new mass-market vehicles, all under $50,000. This diversification of its lineup will be similar to what Tesla has achieved, potentially accelerating sales and improving Rivian's valuation multiple.
As for profitability, Rivian hopes to achieve positive gross margins by the end of this fiscal year. If it does, it should significantly improve the company's survival potential until the launch of its mass-market vehicles. But based on its historical gross profit, achieving positive gross margins within the next few weeks seems ambitious, though Rivian's management has reiterated their confidence.
So, is Rivian a buy at $20? It's a question of how much faith you have in Rivian's ability to overcome its current challenges and capitalize on its significant upside potential. But remember, investing always comes with risks.
Now, let me touch on some enrichment data:
Rivian faces several challenges, including significant profitability concerns, a high cash burn rate, supply chain disruptions, intense competition, and regulatory challenges. However, it has strategic partnerships with companies like Volkswagen, cost reduction efforts, operational efficiency improvements, and market expansion strategies to mitigate these challenges.
Investing in Rivian is not without risk, but with its potential upside, it could be an exciting opportunity for growth-oriented investors. Just be sure to do your own research and consider consulting with a financial advisor.
Despite Rivian's promising future plans, its current struggle with profitability, as shown by its negative gross profit margin and substantial losses, might deter some investors who are primarily focused on finance and returning on their investment dollars. In order to attract more investors and increase its appeal in the broader market, Rivian needs to demonstrate significant progress in financial management, potentially by showing improved gross margins in the near future.