Should you buy Rivian if shares fall below $10?

Rivian (NASDAQ:RIVN) shares have significant growth potential. But you wouldn’t know it by looking at its recent trajectory. In 2024 alone, Rivian shares have lost roughly half their value and are dangerously close to falling below $10 per share. If you’re willing to take extra risk for the chance of a 1000% or more return, this looks like your chance. But there are some factors you should be aware of before you get started.

2 Reasons You Should Bet on Rivian Stock Now

Rivian’s share price has fallen this year, and the company’s rising sales show why. Revenue growth has stalled this year, but that’s true for almost every other EV market. Tesla (NASDAQ:TSLA) included.

Actually, Tesla experienced drop revenue earlier this year, while Rivian was still growing its sales by double digits. Tesla has since bounced back, with sales growing faster than Rivian’s last quarter. But both companies are clearly struggling right now, a time when demand growth for electric vehicles has consistently been lower than expected.

However, there are two reasons to believe that Rivian’s predicament is about to change.

First, the company expects to achieve positive gross margin by the end of the year. There’s still a huge gap to overcome, with Rivian losing $32,000 for every vehicle it sells. This figure is a huge improvement over previous quarters, but it is still a huge jump from last year’s figure. positive gross profit. Tesla achieved positive gross margins quite early in its history. And if Rivian can deliver on what it promises, expect the market to react very favorably, as positive gross margins not only expand the company’s capabilities, but also demonstrate that its vehicles can be sold profitably at a price that customers can afford.

The second event that will radically change Rivian’s fortunes for the better will be the launch of mass market vehicles: the R2, R3 and R3X. These three vehicles, each expected to debut under $50,000, could help replicate Tesla’s success with the Model Y and Model 3. It was these two mass-market vehicles that fueled Tesla’s second and third growth spurts. Rivian’s revenue has grown more than 1,000% since it went public in 2021, reaching $5 billion earlier this year. But as mentioned, sales growth has stalled recently. These new models could allow the company to double or triple its revenue base by the end of the decade.

If Rivian can achieve positive gross margins and execute on its new model launches, expect its significant discount to Tesla’s valuation to close quickly.

TSLA PS Ratio Data from YCharts.

Understand these risks before you get started

In my opinion, the only investors who should invest in Rivian stock right now are those who are willing to invest in diamonds. That is, only those who are willing to accept high volatility over the next few years should take part. There are several reasons for this.

First, it remains highly uncertain whether Rivian will actually achieve positive gross profit this year, despite management’s claims that it will. In past quarters, the company has been able to increase gross profit by several thousand dollars at a time. I expect Rivian to reach that milestone within the next year or so, but it may fall short of its promises this year, calling into question its capital levels and ability to achieve profitability in an increasingly crowded market.

The second factor that makes Rivian a tough investment for most is that its new models – the R2, R3 and R3X – won’t hit the road until 2026. In fact, customers may not get some options until 2027. By default, this makes Rivian only a long-term investment with minimal hard catalysts over the next few years.

At the same time, Rivian’s valuation has become too low to ignore. The stock, for example, is trading at an 80 percent discount to Tesla relative to its sale price. Even before the stock falls below the $10 mark, aggressive growth investors looking for maximum growth potential should consider participating. Just be sure that the average dollar cost will decline if the stock falls further, as it has done throughout 2024.

Don’t miss your second chance at a potentially profitable opportunity.

Have you ever felt like you missed out on an opportunity to buy the best performing stocks? Then you’ll want to hear this.

In rare cases, our expert team of analysts issues Promotion “Double the rate” recommendations for companies that they think are about to become popular. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you had invested $1,000 when we doubled down in 2010, you will have $22,292!*

• Apple: if you had invested $1,000 when we doubled in 2008, you will have $42,169!*

• Netflix: if you had invested $1,000 when we doubled down in 2004, you will have $407,758!*

We’re sending out Double Down alerts for three great companies right now, and there may not be another chance like this anytime soon.

See 3 Double Down promotions »

*Stock Advisor returns as of October 28, 2024.

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.