Rivian Automotive (NASDAQ: RIVN) has been an extremely volatile stock since its initial public offering in 2021. However flexibility can often create amazing buying opportunities. After a recent correction, Rivian stock is now too cheap to ignore. And there is one big reason to buy before the end of the month. Let's dive in, and I'll explain.
The electric vehicle (EV) company has had great success since launching its first two flagship models: the R1T and R1S. Sales have increased from $1 million in September 2021 to over $5 billion today.
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This trend of sales can continue with the introduction of three cars in the mass market: R2, R3, and R3X. Unlike Rivian's current higher-priced models, these are expected to start under $50,000. That could push the company into another phase of massive growth, similar to what the Model 3 and Model Y did Tesla.
And yet, compared to other EV makers such as Tesla and Lucid GroupRivian is trading at a significant discount, according to several valuation metrics. For example, it trades at just 2.2 times sales — Lucid and Tesla trade at 6.5 and 12.3 times sales, respectively. If Rivian traded in line with these peers, there would be a 200% to 600% upside potential.
And right now, there's one catalyst nearby that could close the gap quickly. One of the reasons why the market is always skeptical is that the company keeps losing tens of thousands of dollars on every car it sells. This means that although sales growth has been impressive in recent years, net losses continue to rise.
That's also true of some small EV manufacturers like Lucid, but upscale rivals like Tesla have enjoyed perfect margins for years. In an industry rife with bankruptcy, the market clearly wants to see Rivian turn a profit before giving it a higher valuation, especially given that sales growth has slowed significantly over the past year.
You wouldn't know it from Rivian's cheap price, but the company is poised to switch to higher profits soon. If you listen to what the management has promised, it should happen this quarter. If that happens, it won't be long before this potential becomes a social reality.
Last quarter, Rivian lost about $39,000 per vehicle. That's up from $32,700 in the previous quarter. But this month, management reiterated that the company is on track to achieve gross margins next quarter. That would be incredible, and the market is understandably skeptical. But there is no doubt that Rivian's share price will likely react very well if this milestone is reached.
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