Rivian's (NASDAQ: RIVN) stock price has been volatile over the last 12 months, gyrating in price between $8 and $20. But make no mistake: Long term, this electric vehicle (EV) maker has huge growth potential. And next month could bring one of the most important announcements in company history.
If you've been looking for growth stocks with high upside potential, Rivian could be the perfect fit for your portfolio. But there are a few things to know about before jumping in.
Every three months, public companies like Rivian update investors about their financial situations. Some of these quarterly reports, however, are more important than others. Since Rivian went public in 2021, its sales have grown from a few hundred million dollars annually to more than $4.5 billion. But its gross profit -- that is, the amount of money it earns from selling its electric vehicles -- has remained negative. Despite selling billions of dollars worth of vehicles over the last 12 months, Rivian has generated a gross loss of nearly $2 billion.
Losing money over the short term isn't necessarily a huge problem for most companies. Unusual expenses in a specific quarter can unbalance the balance sheet. But Rivian has been generating gross losses over multiple years. Its margins have stabilized somewhat following a strong surge in revenue, so it's deeply concerning that the company still loses money on every car it sells.
Looking ahead, the company plans to launch three new vehicle models beginning in 2026. These mass-market vehicles will be priced under $50,000 -- a potential inflection point for the company's sales base. But it will require billions of dollars in investments to get these new models to market. And if the company wasn't profitable selling $100,000 cars, why should investors be confident in its ability to generate profits selling vehicles for half that amount?
This skepticism about the company's ability to reach long-term profitability has put a drag on its valuation. Rivian trades at just 3.2 times sales, while rivals Lucid Group and Tesla trade at around 10 and 14 times sales, respectively. To be sure, Lucid Group also remains unprofitable, unlike Tesla. But Lucid's revenue is about one-sixth of Rivian's, and a tiny fraction of Tesla's. The fact that Rivian is still generating losses while operating at its current scale will naturally lead investors to be concerned that it may never be able to sell EVs at a profit, even if its vehicles are in hot demand.
This is where Feb. 20 becomes significant. On that date, investors may receive news that could change Rivian's valuation in a hurry.