Here's Why Rivian Stock Is a Buy Before May 6

Rivian Automotive (NASDAQ: RIVN) reported full-year 2024 earnings in late February. Despite some operational issues during the year, it ended the fourth quarter on a positive note in one very important way. As the electric vehicle maker looks to 2025, it expects to keep the positive news going. Its first-quarter earnings release, expected on or about May 5, will be the first big test.

What did Rivian do in the fourth quarter?

Rivian is an upstart electric vehicle (EV) maker. It is basically building its business from scratch, which is a long and difficult process. That's doubly true, given the capital-intensive nature of manufacturing vehicles. It should come as no surprise to anyone that Rivian has been bleeding red ink for years. Tesla (NASDAQ: TSLA), which is profitable today, had to go through the same start-up phase.

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Image source: Rivian.

In 2023, Rivian was focused on ramping up production so it could make vehicles at scale. It achieved that goal, getting its factory to the point where it made around 57,000 vehicles. With that achieved, the big goal for 2024 was to streamline the manufacturing process so that costs could be reduced. That included a material overhaul of the production line early in 2024.

The production line update went well, but after getting back up and running, Rivian ended up facing parts shortages. It pivoted the vehicles it was producing, helping to keep volumes up and further drive toward its most important goal of the year. That goal was to achieve a modest gross profit in the fourth quarter. The company managed this feat, living up to yet another goal it laid out for investors to monitor.

The big goal for 2025

To be fair, a gross profit is very different from a company with positive net earnings. All a gross profit means is that the company is now generating more from the sale of its vehicles than it costs to produce those vehicles. Still, this is a key step on the way to black ink on the bottom line of the income statement. The big goal for 2025 is to have a gross profit for the full year.

The gross profit in the fourth quarter was "modest," and the goal for 2025 is also a "modest" gross profit. So, it is reasonable to expect that Rivian will be targeting something close to a modest gross profit in each quarter and not one or two really good quarters backed up against bad quarters. This suggests that the first-quarter results will be an important test of Rivian's financial performance.

The stock, which has fallen dramatically from its all-time highs, has been largely range-bound over the past year. This is despite the fact that management has been living up to its publicly stated goals. However, if the company continues to live up to its goals quarter in and quarter out, investors will likely grow more comfortable with the glass-half-full view of the business.

RIVN data by YCharts

Adding to the allure is the list of companies that are backing Rivian and its technology. For example, Rivian has been supplying delivery trucks to Amazon for years. Having been proven reliable, Rivian is now selling the same style of truck to other companies.

It is also working with Volkswagen to help that giant automaker incorporate Rivian's technology into its own fleet. This effort has led to a cash infusion, which will help keep Rivian's balance sheet flush with cash. However, this deal will likely result in Rivian creating a major customer relationship over the long term, too.

This isn't a business that's hoping to find customers; it already has the support of very important companies from around the world.

Rivian is a high-risk/high-reward investment

Rivian is not an appropriate choice for conservative investors. However, if you can handle an aggressive investment in an upstart business, it could be very attractive today before it has the chance to prove that it is living up to yet another goal. The more times it does that, the more likely it is to succeed in its efforts to become a profitable EV maker. And since Rivian has created a very strong business with an impressive roster of partners to help it do just that, acting sooner rather than later could be a wise move.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool has a disclosure policy.