Should You Buy Rivian Stock While It’s Below $13?

Rivian Automotive (RIVN -6.84%) was once one of the hottest acts in the world. In 2021, the stock peaked at a total valuation of $150 billion—about 10% of adzeits market capitalization. The stock was valued at nearly $130 per share. Today, the stock is under $13, with a total market valuation of just $12 billion — or just a fraction of its former size.

So now is the time to buy? If you are looking for maximum growth potential, this could be an incredible opportunity.

Don’t buy Rivian stock for this reason

Right now, I think it’s an incredible time for many investors to buy Rivian stock. But there’s one person who should stay away from this automaker: the investor who doesn’t want to put up with a lot of short-term volatility.

Rivian was founded in the summer of 2009, but didn’t reveal its first two vehicles — the R1S SUV and the R1T pickup truck — until 2018. And then it took another three years to actually ship its first orders. That means it took more than a decade for the company to go from an idea to an actual product.

These long delays are normal for car manufacturers. It takes many years not only to design a vehicle, but also to build the manufacturing infrastructure, get the right certifications and test data, and then market and deliver the vehicles themselves, not to mention providing support for brand new models with limited real-world adoption. .

However, after Rivian started growing its sales base in 2021, things started to move quickly. Within weeks, the company launched its IPO and in 2022 and 2023, sales grew from almost $0 to almost $5 billion. Bottom line, things have been slow moving for Rivian for a long time. But when he reached the tipping point, everything changed in a hurry.

RIVN Revenue (TTM) data by YCharts

Today, we are in another slow period for Rivian. Earlier this year, it announced plans for three new vehicles: the R2, R3 and R3X. Importantly, all three models are expected to have a starting price below $50,000. This should give Rivian access to a significantly larger customer base, as Tesla has demonstrated with the introduction of its mainstream models, the Model 3 and Model Y.

But as with previous model launches, the R2, R3 and R3X will take several years to get to market. The first deliveries are expected by 2026. And because these models will be built on a new platform using a new production infrastructure, it is quite possible that production will be delayed at some point. That’s what happened when Rivian delivered its first R1T models almost half a year later than expected.

The point is, anything can happen to Rivian’s stock price over the next two years. With very few catalysts until the launch of its mass-market models, investors should expect a lot of volatility.

One of the reasons this stock has a huge upside

If you’re willing to stay patient, though, it’s not hard to see how Rivian’s stock price could be significantly undervalued. Tesla began deliveries of its Model 3 in July 2017. At the time, sales were around $10 billion. By 2020, sales were approaching the $30 billion mark. During that time, the company introduced another mass-market vehicle: the Model Y. Two years later, sales were approaching $60 billion — 10 times what the company generated in 2017.

If Tesla is any indication, Rivian’s current sales base of just $5 billion leaves plenty of room for growth. If the R2, R3 and R3X are similarly successful, we could see Rivian’s sales explode by more than 1,000% over the next five to seven years. With a high level of customer satisfaction and loyalty, Rivian has a good chance of achieving this feat — if it can bring its models to market on time and on budget.

There is a lot of uncertainty here, particularly around funding. It’s not cheap to build the manufacturing infrastructure, and Rivian needs a lot of new capital to survive the next few years. But if you’re willing to bet on a story that will last for years, there are few stocks with as predictable a growth potential as this one. Just be prepared for volatility along the way with dollar cost averaging when the stock price is weak.