Is Rivian a Millionaire Maker?

Rivian Automotive (RIVN -1.60%) is at an important crossroads. On a path lies profitability, growth and long-term success. Down the other is obsolescence. Okay, maybe that’s a little over-dramatic, but Rivian’s big goal for 2024 is to make a gross profit. It’s not the same as generating positive earnings, but it’s a vital step along the way. If it fails to take that first step, well, the long-term appeal here is limited. But if he can live up to that goal, the future could be very bright.

What does Rivian do?

From a high-level point of view, Rivian doesn’t do anything interesting. He only makes trucks. In the consumer space, that means a pickup truck. In the business space, at least for now, that means delivery vans. The important nuance here is that it makes electric trucks. While not entirely unique, as other automakers also produce electric trucks, Rivian has an award-winning product that has been very popular with consumers. Oh, and it’s actually hit a material production level at its plant, which is expected to produce about 57,000 trucks in 2024.

Image source: Getty Images.

The problem is that Rivian is basically still in startup mode. So they are making big losses. That won’t change in 2024. In fact, the company spent heavily in the first half of the year to modernize its manufacturing facility and improve its truck offering. The factory upgrade went well, so management is executing its plan. But the real test will be whether Rivian can turn a modest fourth-quarter gross profit as management targets. It won’t be a good thing if that target gets pushed, but if a few extra quarters are needed, it won’t be the worst thing in the world. Rivian has $7.8 billion in cash and short-term investments on its balance sheet to help it grow.

Given the ongoing red ink on the bottom line, that money won’t last forever. But Rivian recently struck a deal with Volkswagen worth about $5 billion, so more money is coming in and that should give Rivian the space it needs to continue its electric vehicle development.

Rivian’s story has an interesting little twist

That Volkswagen deal is more important than it sounds. Yes, it’s about Rivian finding additional funding as it spends to grow its business. But the key to the deal is that Rivian gives Volkswagen access to proprietary technology. From day one, Rivian wanted to own its technology so it could sell it to other automakers. This is exactly what is happening with Volkswagen.

This not only proves the business concept, but also means that Rivian is about more than just selling its own branded trucks. If it can turn a gross profit on its trucks, the Volkswagen deal suggests there is also a very real path to a bottom line profit as Rivian expands its reach into the wider automotive sector.

RIVN data by YCharts

Assuming Rivian can do this, investors will likely flock to the stock. Although adzeIts stock has fallen dramatically from its highs, yet seen a massive run from the days when the company was still in upstart mode. That’s the logical point of comparison here, suggesting that Rivian could indeed be a million dollar stock.

Rivian comes with high risk

That said, Rivian still has a lot to prove and needs to execute at a high level. If not, well, it could go out of business like many other EV manufacturers have done. So investors should not enter here without fully understanding the risks. However, so far Rivian has performed well and appears to be on a solid upward trajectory with its business. So the bottom line is that Rivian could be a millionaire maker, but only if you have the stomach for a more aggressive investment approach.