Is Rivian Stock Yesterday's News?

Rivian (NASDAQ: RIVN) is gearing up to launch its next vehicle platform, and the stock price has surged by roughly 36% over the last year in anticipation. Still, the electric vehicle (EV) company's share price is down by roughly 90% from the all-time high it touched in late 2021 -- and big questions remain about the business's potential path to profitability.

Growth in the EV market has slowed substantially since the company held its initial public offering in 2021, and the rise of competition from Chinese manufacturers could seriously dampen Rivian's growth trajectory. Is Rivian stock yesterday's news, or could the EV maker carve out a durable position that translates into big returns for shareholders who buy now?

Image source: Rivian.

Is Rivian's valuation rebound sustainable?

In the third quarter, Rivian's revenue grew by 78% year over year to roughly $1.56 billion. It also posted a gross profit of $24 million -- an improvement of $416 million compared to the prior-year period, when it booked a steep gross loss. Rivian has begun to post positive gross margins, which is admittedly a major positive development. On the other hand, those gross margins are still very low -- and it continues to post big net losses.

Its automotive gross profits still came in at negative $130 million. That shrunk its automotive gross loss by $249 million compared to last year's Q3, but its cost of goods sold continues to be higher than its revenue.

The company delivered 13,201 vehicles in the third quarter and announced at the beginning of this month that it had delivered 9,745 vehicles in Q4. The late-year drop-off meant that the company closed out 2025 with fewer deliveries than it posted in either 2023 or 2024, and on a quarterly basis, it has yet to surpass the peak of 15,564 units delivered in the third quarter of 2023.

With the company on the verge of rolling out its R2 SUVs, Rivian will have opportunities to reenergize deliveries and significantly increase its customer base. The R2 models will be significantly cheaper than the company's R1 models. A surge in unit demand should help the company support the expansion of its manufacturing and provide it with some economies-of-scale benefits, but it could still be a while before Rivian is posting positive gross profits on its vehicles.

R2 SUVs are expected to hit the market in the first half of this year with a price of roughly $60,000 for the launch edition. A different R2 configuration with a base price of $45,000 is set to go into production later. Meanwhile, current R1 models have an average selling price of $86,500.

The more affordable R2 options could quickly come to make up a substantial portion of the company's overall sales mix. While the R2s have been designed with efficiencies to help support mass-market pricing, they could actually wind up pushing Rivian's gross margins and operating income margins lower for the foreseeable future.

With EV demand currently looking soft and a significant risk that the rollout of the R2 will lead to sustained margin headwinds that may eventually give way to potential improvements, I wouldn't bet on Rivian's stock comeback right now.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.