Is Rivian Stock a Buy?

Want to add a growth stock to your portfolio that could rise in value by more than 1,000% over the next decade? Rivian Automotive (RIVN 5.29%) could be your answer. Its shares have been weak since the company’s initial public offering (IPO) in 2021, but there are two reasons to believe the electric vehicle maker has turned a corner. This stock isn’t for everybody, but if you’re looking for maximum growth potential, you may be in the right place.

Rivian’s growth could soon go parabolic

Few companies offer as much growth potential as Rivian, but investors must be patient. Rivian’s growth is highly likely to go parabolic over the next few years. Allow me to explain.

At its core, Rivian is essentially replicating Elon Musk’s playbook that supercharged Tesla‘s historic growth trajectory. First, launch a small handful of high-priced models that showcase the best your brand has to offer, even if the price point excludes most potential buyers.

Tesla achieved this with its Model S and Model X lineups, which dominated their respective categories despite price points above $100,000 for fully equipped models. Rivian achieved this most recently with its R1T and R1S models.

Both Rivian models are priced close to the same as the Model S and Model X and have received similar praise out of the gate. Consumer Reports, for instance, found that Rivian’s brand loyalty and customer satisfaction outpaces every other car manufacturer — electric or otherwise.

Rivian has now proven its ability to create beautiful electric cars that customers love. The next step is to scale into the mass market. Earlier this year, Rivian announced three new models — the R2, R3, and R3X — which will all debut under $50,000. These models will put Rivian on the map, just as Tesla’s Model 3 and Model Y proved to be an inflection point for its sales trajectory. Previous to the Model Y and Model 3, Tesla’s sales base wasn’t too far off of Rivian’s current revenue figures.

RIVN Revenue (TTM) data by YCharts.

This stock is only for maximum-growth investors

Here’s the catch. Rivian’s new mass-market models aren’t expected to hit the market until 2026. That’s potentially two full years away. In the meantime, it will be all about execution.

The company recently received an $827 million state incentive to ramp up its Illinois manufacturing plant to support production of its new mass-market models, and a new joint venture with Volkswagen could add billions in new capital to support additional development efforts.

But Rivian is still burning cash quickly, losing money on every car it sells, although management believes it could shift to positive gross margins by the end of 2024.

The point is, it’s still early with Rivian. There are many unknowns with its funding, manufacturing, and sales ramp up. But there’s a light at the end of the tunnel, and investing early is the best way to ensure maximum growth potential.

Right now, Rivian’s market capitalization is just $13 billion. No matter what valuation multiple you look at, it’s clear from its diminutive market cap that Rivian’s valuation could soar with the release of its R2, R3, and R3X models in 2026 and beyond. The current 2.5 price-to-sales ratio is hardly a terrible entry point.

Just remember — this stock is for patient investors only. You must be willing to ride through volatility for a year or two before Rivian’s true inflection points begin to gain traction.