Rivian stock soars 40% from April 2024 lows: Is it a buying opportunity?

USA Today

04-03-2025

Rivian stock soars 40% from April 2024 lows: Is it a buying opportunity? Despite short-term volatility, Rivian may be an impressive EV stock in the coming months.
Share prices of electric vehicle manufacturer Rivian (NASDAQ: RIVN) are up almost 40% from their all-time low in April 2024. Although an impressive run-up, it is still nearly 36% lower than its 52-week high of $18.11 in July 2024.
Rivian came out with a strong performance in the fourth quarter of 2024 on Feb. 20, reporting positive gross margins for the first time. Despite the excitement about Rivian's margins, the company's share prices did not experience any positive impact. Investors remain concerned about the company's weaker-than-expected delivery outlook for 2025.
Rivian expects between 46,000 and 51,000 vehicle deliveries for 2025 — including a slower start of about 8,000 deliveries in the first quarter. This is lower than the 51,579 vehicle deliveries in 2024. Furthermore, Wall Street was expecting 55,000 vehicle deliveries in 2025.
Shares of the EV start-up tanked by 7.8% on Feb. 24 and by another 4.3% on Feb. 25 after BofA Securities' analyst John Murphy downgraded the stock to "underperform" from "neutral" and reduced the target price by 23% to $10. Murphy has expressed worries about increasing competition in the EV space, slowing EV demand, and changing regulations related to EV adoption.
So, the question is now: Is this share price correction a buying opportunity, or is the Rivian stock still trading at unsustainable levels? Let's assess some important trends for this EV player, and what they can eventually mean for the company's share price trajectory in the coming months.
Improving financials
Rivian's first-ever positive gross margins are a direct result of a dramatic $31,000 reduction in the cost of goods sold (COGS) per vehicle in the fourth quarter compared to the same quarter of the prior year.
The company has introduced engineering-driven design changes to boost performance, reduce costs, and improve ease of manufacturing and servicing in the second-generation R1 platform. Furthermore, the company is committed to optimizing its manufacturing processes through line balancing, robotics, automation, increasing operator efficiency and logistical optimizations.
Besides cost savings, Rivian demonstrated an increase in automotive revenue per unit (excluding regulatory credit revenue) to $86,000, thanks to an improvement in the sales mix toward R1 vehicles with a higher average selling price.
R2 platform launch
Rivian is gearing up to launch R2 vehicles in the first half of 2026. The bill of materials costs almost half, and the non-bill materials cost significantly less in R2 compared to the company's flagship R1 vehicle.
With 95% of the bill of materials already sourced, R2 deliveries are less likely to be affected by commodity shortages. R2's starting price of $45,000 is also nearly half of R1's average selling price, which exceeds $90,000. The more economically priced R2 is thus expected to expand the target addressable market for Rivian.
AI autonomy
Rivian has also been focused on developing cutting-edge AI-powered autonomous driving capabilities. The Gen 2 vehicle platform on R1 consists of an impressive sensor suite that feeds inputs into an advanced computing platform. Rivian uses real-time driving data and simulations to train its autonomous driving system offline. The improvements are then deployed in new vehicles. This has helped create a virtuous data flywheel effect, wherein real-world driving experiences are used to improve the system.
Rivian is gearing up to launch increasingly advanced autonomous features, such as a hands-free highway feature and an eyes-off highway feature. The company plans to allow for more use cases, including roads and types of conditions for which these hands-off and eyes-off features can be deployed. Furthermore, CEO RJ Scaringe expects Rivian's existing hardware to support even more sophisticated capabilities through software updates.
What next?
While the EV industry is subject to regulatory uncertainties and supply chain disruptions, Rivian's improving fundamentals offer hope. History shows that EV stocks continue to recover in cases they demonstrate sustained improvement in margins, production capacity, and vehicle delivery numbers. This is evident from Tesla's case, which saw dramatic share price declines in 2020 and 2021 but has since managed to win investor confidence in improving fundamentals. Similarly, Rivian stock may also surge significantly higher in the coming months.
In the fourth quarter, Rivian produced 12,727 vehicles and delivered 14,183 vehicles. With deliveries exceeding production, the company has been focused on reducing inventory levels in 2024, thus generating cash from working capital.
Furthermore, while the delivery targets in 2025 are somewhat conservative, that can be attributed to the company's requirement to shut down consumer and commercial manufacturing lines at their Normal, Illinois, plant for nearly one month in the second half of 2025 to prepare for the launch of R2 in 2026. This is mostly a temporary challenge and will be resolved by the end of 2025. The company also plans to increase production levels in the first and second quarters of the fiscal year 2025 to build inventory, which, in turn, can partly mitigate the impact of the plant shutdown.
It is undeniable that Rivian is a highly volatile stock, sensitive to negative news about missed production targets, supply chain challenges, intensifying competition and overall EV market dynamics. Hence, it is imperative that investors closely monitor the broader EV landscape to avoid cases like Nikola, wherein the stock crashed after a significant rally due to deteriorating fundamentals.
Rivian is trading at 2.6 times sales, far lower than its historical three-year average multiple of about 64. Considering Rivian's current fundamentals and cheap valuation, long-term investors with above-average risk appetites can consider buying a small stake in the stock on the current dip. Investors can also practice a dollar-cost averaging strategy to participate in the upside of the stock while controlling overall risks.
Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
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