Is Rivian Stock a Buy Now?

Rivian Automotive (NASDAQ: RIVN) shares have surged over the past month, rising in value by roughly 50%. But don't think that it's too late to take advantage. The electric vehicle maker is about to experience a huge jump in growth, a surge that could persist for several years.

Shares still look like a strong buy for patient investors, but there is one particular risk that every investor must be aware of before diving in.

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Rivian's growth is about to explode

It takes a long time to get a new vehicle from the design stage to production and final delivery. A long time. Rivian was initially founded in 2009 as Mainstream Motors. It didn't release its first vehicle, the R1T, until 2021 -- more than a decade later. The R1S, which uses essentially the same platform as the R1T, was released the following year.

It's not surprising that it took Rivian this long. Often, new vehicles from new manufacturers like Rivian involve novel design and engineering concepts, especially for electric vehicles. Production facilities, meanwhile, need to be built and scaled up from scratch. And then you have the litany of regulatory and safety hurdles to pass, nonetheless sourcing various parts from potentially dozens of third-party suppliers.

Production of the R1T was delayed several times simply due to global chip shortages -- a small but critical component that makes the vehicle possible. And in Rivian's case, you also need to develop the software necessary to not only run the vehicle itself, but also deliver on any promised self-driving capabilities.

One of the biggest barriers isn't even about making the car from a physical standpoint, but funding the car from a capital standpoint. It takes billions of dollars to get vehicles like the R1T and R1S to market, not to mention years and years of patient capital. It's hard to find investors willing to fund a company for more than a decade with zero revenue -- a major reason why so many EV start-ups have gone under over the decades.

When the R1T and R1S made it to market, Rivian's sales exploded from essentially zero to more than $5 billion. Revenue has stagnated in recent quarters due to a lack of new models.

But starting next year, we should see growth surge yet again thanks to the introduction of three new vehicles: the R2, R3, and R3X. All are priced under $50,000, making Rivian's vehicles affordable to millions of new buyers. It will likely still be a year or two until all of these models are in production and on the road, but as we've seen, that's nothing compared to the full timeline involved in bringing new models to market.

We are now in the final innings of Rivian's dormant growth phase. Both 2026 and 2027 should see sales surge to historic levels, and despite the recent stock price spike, shares still trade at under 4 times sales. But before you jump in, you must understand the primary risk factor.

Image source: Getty Images.

Don't buy Rivian stock before understanding this risk

Production timelines rarely go according to plan. So while management expects to start production on the R2 in 2026, don't expect a full production ramp-up until late in the year, and possibly even into 2027. The same will be true of the company's R3 and R3X models, which may not reach customers in any meaningful way until 2027.

Compared to full vehicle production timelines, waiting 12 to 24 months is small potatoes. But for the production ramp to translate into significantly higher sales, it could take several years beyond the start of production. That makes Rivian a multi-year story.

Yes, the valuation is cheap, especially compared to other EV stocks. But it will require years of patience for investors to realize the biggest gains. That's easier said than done.Despite the recent stock price spike, Rivian is still a strong buy. But patience will be necessary.

Should you invest $1,000 in Rivian Automotive right now?

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Ryan Vanzo 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.