9 Reasons Rivian Stock Is a Buy Now

A move toward mass adoption of electric vehicles now looks like it will become a true reality in the next few years -- providing exciting opportunities for investors. If you're looking for an up-and-coming electric-vehicle (EV) stock to ride that wave, Rivian Automotive (RIVN 2.84%) should be high on your list of candidates. Here's a look at nine reasons why this company is driving its business in the right direction. 

1. Young automakers can't simply sell EVs to early adopters and new consumers -- the quality has to be there for word of mouth to travel. The good news is that Rivian's R1T and R1S are highly regarded for their quality. Rivian's R1T ranked highest overall for consumer satisfaction in J.D. Power's "2023 U.S. Electric Vehicle Experience Ownership Study," dethroning Tesla's Model 3 in the process.
2. Rivian's next-generation vehicles, built on the upcoming R2 platform, are estimated to be priced between $40,000 and $45,000, much lower than the base R1T price of roughly $75,000. The lower price point will be critical to boost sales and reach a more cost-conscious consumer.
3. Early in 2023, Rivian hit a speed bump in production. Management has since utilized its less expensive Enduro motor, which was developed in-house, instead of an outsourced quad motor, and production has quickly bounced back, along with deliveries. In fact, management has raised full-year production guidance two quarters in a row.
   
   
   

   Data source: Rivian production releases. Chart by author.

4. While Rivian is still losing money for each vehicle sold, investors shouldn't overlook the massive progress the company has made to improve its profitability per unit. Consider that during the third quarter of 2022, Rivian lost nearly $140,000 per vehicle. That's dropped to roughly $32,500 as of the second quarter of 2023. Management expects that number to continue dropping.
5. Rivian is launching the Max Pack versions of the R1T and R1S, which bumps its range to 410 miles for the R1T and 400 miles for the R1S, compared to roughly 270 miles range on the standard pack. Range is one of the most important factors to lure in EV consumers. Those who see the value and are willing to pay an extra $16,000 will help Rivian's revenue and bottom line.
6. A huge positive for Rivian and its investors has been the automaker's ability to avoid the price war that Tesla's constant price changes fired up. Because Rivian's truck and SUV don't compete in the same segments as Tesla's passenger cars, the company has so far been able to hold pricing far better than many EV competitors. This is a massive advantage, for now.
7. As with many young companies, especially automakers, Rivian is currently burning through cash. Net cash used in operating activities, however, did drop to negative $877 million during the third quarter, compared to negative $1.37 billion for the same period last year. Further, Rivian ended the third quarter with over $10 billion in total liquidity, ensuring the company can take the next steps forward in its business vision.
   
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   NASDAQ: RIVN

   Rivian Automotive

   Today's Change

   (-2.84%) $-0.43

   Current Price

   $14.87

   Key Data Points

   Market Cap

   $19B

   Day's Range

   $14.81 - $15.55

   52wk Range

   $10.36 - $22.69

   Volume

   1.2M

   Avg Vol

   33M

   Gross Margin

   -276.59%
8. A once-exclusive partnership with Amazon for custom-designed Rivian Commercial Vans is no longer exclusive, and Rivian is now able to sell these vehicles to other companies looking to electrify their delivery fleets. Best of all, both companies are still focused on bringing 100,000 Rivian vehicles to the road.
9. Critical to Rivian's near-term success will be attracting new consumers, spreading word-of-mouth advertising, and satisfying current buyers. Rivian's demo-and-drive physical locations opened in Atlanta, Brooklyn, Chicago, Denver, Nashville, Seattle, and Vancouver since the end of the second quarter, with more coming in the fourth quarter. In 2024, Rivian also will have 408 mobile service vehicles on the road that are capable of handling the majority of Rivian vehicle repairs to keep current buyers satisfied with the experience.

The bottom line

There's a lot of attention on the EV industry as the broader automotive industry is on the cusp of evolving rapidly over the coming decades. Rivian may not be the next Tesla, but it also doesn't have to be to become a highly successful investment. The young truck and SUV EV maker is definitely heading in the right direction, as evidenced by the nine reasons above, and it's driving there quickly.