Buying the right stocks at the right time can transform your life. For example, if you had invested $10,000 in an electric vehicle (EV) market leader. Tesla in 2014 you would have a whopping €245,300 today. That is a return of more than 2,430% in just ten years. Could be Rivian automotive industry (NASDAQ: RIVN) be the next best thing? Let’s explore the pros and cons of this EV startup to decide if it has multi-bagger potential in the long run.
Rivian was at the top of the world when its shares became available through a initial public offering (IPO) in 2021. This was a different time for the EV industry. Tesla had recently become profitable, proving that the technology was here to stay. And Rivian’s offering of high-performance trucks and electric cars promised to fill an overlooked opportunity in the market.
Do you miss the morning spoon? Wake up with Breakfast news in your inbox every market day. Register for free »
With a starting market capitalization of more than $100 billion, the company immediately became America’s second most valuable automaker, behind Tesla. — leaving behind traditional brands such as Ford Motor Company And General engines in the dust. In retrospect, this made little sense. And the The market on Rivian quickly deteriorated as growth stalled and rivals began offering products such as the F-150 Lights, Silverado EV and Cybertruck, which took over its niche.
Rivian’s third-quarter revenue fell 18% year-over-year to $874 million both production and deliveries. To be honest, the EV industry is now much more competitive than the competition it was when Rivian went public. And macroeconomic challenges such as inflation and high interest rates are unlikely to promote consumer interest in their luxury cars.
But it is difficult to make each Apologies to Rivian if competing products like the Tesla Cybertruck are doing so well. According to Kelley Blue Book, Elon Musk’s polarizing vehicle has sold a whopping 28,240 units until now this year beat Rivian’s R1T, which sold just 10,387 units. This is despite the Cybertruck’s higher sticker price, with a base price of $82,235, compared to Rivian’s R1T, which starts at $71,700.
Worse, Rivian lost an average of $39,130 on every car sold – up from $30,448 last year. Of a gross margin at -45%, it costs the company more to produce and deliver its cars than it can recoup by selling them.
CEO Ryan Scaringe believes he can change the situation. He claims the company is on track to achieve gross profit in the fourth quarter by improving unit sales and variable costs per unit. This includes selling regulatory credits, improving material costs and unlocking production efficiencies. But this does not solve Rivian’s core problem of fierce competition and poor sales growth.
There are several things Rivian can do it to try turn his situation around. The first step will be to secure the financing needed to stay in business. To this end, the company is working with an industry giant Volkswagen Group to launch a $5.8 billion joint venture that will focus on creating EV software and architectures. Rivian will benefit from cash injections, while Volkswagen will gain access to its more advanced technology.
While this deal makes sense in the short term, it is also alarming Rivian to see give up some of it economic moat to a potential competitor. Volkswagen vehicles are expected to start using Rivian’s architecture in 2027.
All this said, I’m still cautiously optimistic about Rivian. The company doesn’t appear to be a life-changing purchase at this point. But beneath the noise, it makes quality products that consistently win awards for safety and consumer satisfaction. And eventually enough buyers might take notice. While it’s still too early to buy Rivian stock, investors should keep it on their watchlist as they wait for more information.
If our analyst team has a stock tip, it could be worth listening to. After all, Stock Advisors the total average return is 939% – a market-shattering outperformance compared to 179% for the S&P 500.*
They just revealed what they think are the 10 best stocks for investors to buy now… and Tesla made the list, but there are nine other stocks you might be overlooking.
View the 10 stocks »
*Stock Advisor returns December 2, 2024
Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Tesla. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.
Can Buying Rivian Stock Give You a Lifetime? was originally published by The Motley Fool
