Rivian Automotive (RIVN 2.84%) was one of the hottest electric vehicle stocks of 2021. The EV maker went public at $78 per share last November, and its stock started trading at $106.75 before skyrocketing to an all-time high of $172.01 a week later.

Rivian initially attracted so much attention because it was backed by Amazon (AMZN 1.30%) and Ford (F 0.47%). Amazon had ordered 100,000 of its electric delivery vehicles to be delivered by 2030, while Ford's Lincoln division had been developing an EV with Rivian before abandoning the project during the pandemic. At the time of Rivian's IPO, Amazon and Ford owned 20% and 12% of Rivian, respectively.

Rivian's R1T pickup.

Image source: Rivian.

But today, Rivian's stock trades at about $30. The company struggled to ramp up its production, and supply chain disruptions exacerbated that pain. As interest rates rose, investors also sold frothy stocks like Rivian -- which was valued at $153 billion at its peak last November. That was 83 times the sales it was expected to generate in 2022, and made it more valuable than Ford ($79 billion) and General Motors ($91 billion).

Rivian's stock still isn't cheap at 16 times this year's sales. So should investors consider picking up some shares at these levels, or is it too late for the EV maker to live up to Wall Street's bullish expectations?

A slow but promising start

Rivian produces three main vehicles: the R1T pickup truck, the R1S SUV, and the Amazon electric delivery van (EDV). Its R1 vehicles start at just under $70,000 and can travel more than 300 miles on a single charge.

In addition to Amazon's order for 100,000 EDVs, Rivian has received more than 90,000 preorders for its R1 vehicles in the U.S. and Canada as of May 9. Rivian started producing its vehicles last September, but it only produced 1,015 vehicles by the end of the year -- which missed its own target of 1,200 vehicles as it grappled with supply chain challenges.

But as of May 9, Rivian has manufactured approximately 5,000 vehicles. During its first-quarter earnings report, it reaffirmed its annual production target of 25,000 vehicles, as well as its planned annual capacity of 600,000 vehicles for its plants in Illinois and Georgia.

The headwinds and tailwinds

In its first-quarter shareholder letter, Rivian says the "supply chain continues to be the bottleneck of our production." More specifically, a shortage of semiconductor and non-semiconductor components had caused it to lose "approximately a quarter" of its planned production time since March 31.

Amazon has also been hedging its bets against Rivian's potential failure. Back in January, it agreed to start buying the electric Ram ProMaster from Stellantis (STLA 1.55%), formerly known as Fiat Chrysler, in 2023. That announcement caused Rivian's stock to stumble for several straight days. Ford also reduced its stake in Rivian to less than 10% in May.

But on the bright side, Rivian said that as it demonstrated it could successfully ramp up its production, its "suppliers are leaning in to help ensure we can achieve our targets." Therefore, Rivian is still faring a lot better than Canoo (GOEV -6.77%), a smaller electric van maker which recently received a big order from Walmart but still hasn't manufactured a single commercial vehicle. It also sounds like it's in better shape than the luxury EV maker Lucid (LCID 5.88%), which slashed its full-year production target from 20,000 vehicles to just 12,000 to 14,000 vehicles earlier this year.

Can Rivian grow into its valuation?

Analysts expect Rivian to generate $1.8 billion in revenue this year if it can achieve its production target of 25,000 vehicles. But they also expect its net loss to widen from $4.7 billion to $6.2 billion.

In 2023, they expect Rivian's revenue to surge 237% to $6.2 billion and for its net loss to narrow to $5.8 billion. In 2024, they expect its revenue to jump 98% to $12.3 billion with a narrower net loss of $5.0 billion. We should take those estimates with a big grain of salt, but Rivian's stock doesn't look terribly expensive at five times next year's sales.

Its net losses look steep, but it ended its latest quarter with $17 billion in cash, cash equivalents, and restricted cash. Its low debt-to-equity ratio of 0.2 also gives it room to take on more debt.

It's not too late to buy Rivian

It would have been too late to buy Rivian last November after its wild post-IPO rally, but it now looks more reasonably valued relative to its growth potential. It's still a highly speculative stock, but it might be worth buying if you believe the company can fulfill its ambitious production targets this year.