Here’s why Rivian stock is worth buying before November 30

Rivian Automotive (NASDAQ:RIVN) the stock has been extremely volatile since its 2021 initial public offering. However, volatility can often create incredible buying opportunities. After a recent correction, Rivian stock is now too cheap to ignore. And there is one main reason to buy before the end of the month. Let’s dive in and I’ll explain.

Rivian says it will soon reach this milestone

The electric vehicle (EV) maker has seen great success since the launch of its first two luxury models: the R1T and R1S. Sales have grown from $1 million in September 2021 to more than $5 billion today.

This sales trajectory could continue with the launch of three new mass market vehicles: the R2, R3 and R3X. Unlike Rivian’s more expensive current models, they are expected to cost less than $50,000. This could push the company into a new phase of significant growth similar to what the Model 3 and Model Y did. Tesla.

And yet, compared to other electric vehicle manufacturers such as Tesla and Lucid GroupRivian is trading at a significant discount, according to several valuation metrics. For example, its sales are only 2.2 times its sales, while Lucid and Tesla’s sales are 6.5 and 12.3 times its sales, respectively. If Rivian shares traded at the same level as these peers, the upside would be between 200% and 600%.

And right now, there is one short-term catalyst that could quickly close that gap. One reason the market remains skeptical is that the company continues to lose tens of thousands of dollars on every vehicle sold. This means that while sales growth has been impressive in recent years, net losses continue to rise.

This is also true for other smaller EV makers such as Lucid, but larger competitors such as Tesla have achieved positive gross margins for years. In an industry rife with bankruptcies, the market clearly wants Rivian to achieve gross profitability before assigning it a higher valuation, especially since its sales growth has slowed significantly over the past year.

You wouldn’t know it from Rivian’s very low valuation, but the company will hit gross profit very soon. If we listen to management’s promises, this should happen this quarter. If this happens, there won’t be much time left before this potential becomes a public reality.

Rivian lost about $39,000 per vehicle last quarter. That’s up from $32,700 the previous quarter. Yet management confirmed this month that the company is on track to achieve positive gross margin by the next quarter. This would be an incredible feat, and the market is quite skeptical. But there is no doubt that Rivian’s share price will likely react very positively if this milestone is reached.

RIVN PS Ratio Data from YCharts; PS = selling price.

Don’t buy these stocks just for short-term results.

Make no mistake: Rivian stock is not for short-term investors. If the company fails to generate positive gross margins in the next quarter, the market could lose even more faith in it, especially since overall sentiment toward EV stocks remains low right now compared to boom years like 2021.

To invest in Rivian today, you need to be happy or future. If the company achieves positive gross margins, it will be a huge vote of confidence in its management and its ability to survive long enough to begin shipping its vehicles to the mass market in 2026 and 2027. But if management is wrong on its forecasts and the stock sells off, you should be excited about the opportunity to buy more shares at a discount.

Customer loyalty surveys conducted by media such as Consumer Reports It’s already been suggested that Rivian is capable of producing cars that customers love. And bringing electric vehicles to market for under $50,000 has proven to be a huge growth lever for Tesla. I expect the same to happen to Rivian if it can survive financially until these models go on sale.

Positive gross margins will greatly improve the company’s chances of reaching this milestone, but its partnerships with deep-pocketed investors including Amazon And Volkswagen mitigate some of these financial problems.

In any case, investors looking for aggressive growth should take a closer look at Rivian before its next quarter results are released. Just be prepared to double down if expectations don’t match reality. Otherwise, this promotion is most likely not for you.

Is it worth investing $1,000 in Rivian Automotive right now?

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Ryan Wanzo has no position in any of the stocks mentioned. The Motley Fool has positions in Tesla and recommends it. The Motley Fool has a disclosure policy.