Is Rivian Stock a Buy on the Dip?

It's been a volatile start to the year for Rivian Automotive (NASDAQ: RIVN), and that pattern continued after the stock price fell following its Q1 results release after the bell on April 30. The stock is now down more than 25% year to date, as of this writing.

Let's dive into the electric vehicle (EV) maker's results and prospects to see if investors should buy the dip in the stock.

The roadmap to profitability

In Q1, Rivian saw revenue rise 11% year over year to $1.4 billion, while deliveries jumped 20% to 10,365 vehicles. Nearly half of its revenue came from Electric Delivery Van deliveries to Amazon.

Image source: The Motley Fool.

Automobile revenue fell by 2% year over year to $908 million, while software and service revenue surged 49% to $473 million. Approximately 60% of its software and service revenue came from its joint venture with Volkswagen. It will roll out point-to-point driving capabilities by the end of this year, including Uber Technologies' robotaxi pilots with safety drivers in Miami and San Francisco. It is looking for full autonomous robotaxis by 2028.

Rivian recorded a gross profit of $119 million, good for a 9% gross margin helped by its high-margin software business. While automotive gross margins were negative, it expects to still achieve "healthy" gross margins once its new R2 SUV scales up. Its adjusted EBITDA loss widened from $329 million a year earlier to $472 million. Meanwhile, it had free cash outflows of $1.08 billion in the quarter, compared to $526 million a year ago.

Looking ahead, the company kept its guidance unchanged. It still expects to record between $2.1 billion and $1.8 billion in negative adjusted EBITDA, while spending between $1.95 billion and $2.05 billion in capital expenditures (capex). It is also still looking to deliver between 62,000 and 67,000 vehicles despite its factory being damaged by a tornado.

It also announced that Volkswagen successfully tested its zonal architecture in winter weather, triggering another $1 billion equity investment. On top of that investment, which it just received, it expects to get another $1 billion from Volkswagen and $550 million from Uber this year.

Is Rivian a buy on the dip?

Rivian remains a speculative stock, but it certainly has some exciting developments with the rollout of its new R2 vehicle and its push into autonomous driving. The R2 could be a game changer, as its lower price point gives it a much wider audience, which should not only drive revenue growth but also spread more fixed costs per vehicle, helping drive gross margins. Meanwhile, it's not planning to build a robotaxi; it's just offering autonomous-driving software, making this a high-margin opportunity.

As such, I think risk-tolerant investors can take a small speculative position on this pullback.

Geoffrey Seiler has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Uber Technologies. The Motley Fool has a disclosure policy.