Rivian Stock: EV Recovery Play or Value Trap?
Key Points
Rivian Automotive shares briefly surged higher earlier this month following a well-received earnings release.
Rivian reported a gross profit in the third quarter, but a key driver of that strong result was a temporary -- and now-absent -- tailwind.
Expect Rivian stock to remain volatile as investors await its next major catalyst.
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Rivian Automotive's (NASDAQ: RIVN) stock got a nice boost earlier this month after the electric vehicle (EV) maker delivered unusually strong Q3 results. However, since then, the market has tapped the brakes, and enthusiasm for Rivian shares has waned as more investors come to recognize that the key factor pushing sales higher last quarter is unlikely to persist.
Given the price drop, should interested investors think about buying Rivian, or should they stay on the sidelines?
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A profitability milestone
Rivian reported Q3 results, reporting a 78% year-over-year surge in revenue to $1.56 billion. Rivian also reported a net loss for the quarter: $1.17 billion, or around $0.96 per share. Even so, it did reach a profitability milestone. For the quarter, Rivian booked a positive gross profit of $24 million. However, repeating that feat in Q4 could prove challenging.
Should you buy Rivian stock?
Last quarter, the EV industry benefited from an unusual one-time sales boost. The U.S.'s "big beautiful bill" put an end to the federal tax credit for EV purchases beginning Oct. 1. That led car buyers thinking about buying to act early so they could take advantage of the credit before it disappeared, pulling forward many EV purchases that might have otherwise happened later.
Even if EV sales drop this quarter, Rivian could still report a positive gross profit again. After all, another factor that helped to improve Rivian's gross margin was the technology licensing revenue connected to its partnership with Volkswagen. That said, Rivian's market cap of $18.2 billion remains based largely on market sentiment about its future prospects. Expect shares to remain volatile, especially if Q4 results fall short of expectations.
For those who are still bullish on Rivian's long-term growth story, however, there may be an investment opportunity coming here. The next big catalyst for Rivian, the debut of its lower-priced R2 electric SUV, remains months away. If market sentiment for this stock continues to turn bearish in the meantime, you may soon be able to open a position at a lower price.
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Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.
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