Affordable Electric Vehicle (EV) Share to Purchase with a $500 Investment at Present

Affordable Electric Vehicle (EV) Share to Purchase with a $500 Investment at Present

This year, numerous electric vehicle (EV) stock valuations took a dive. One that had a tough time was Rivian (-2.12% for RIVN). At the start of 2024, shares were trading above $20. However, a month ago, they dipped below the $10 threshold.

Then, something unexpected happened. In the past few weeks, Rivian shares have experienced a massive surge of over 40%. It seems like the market sentiment towards this struggling EV stock has finally changed direction. But if you believe the growth potential has already been realized, you might want to reconsider. This is a company with immense future growth prospects, and there's a specific event that should excite growth investors.

Focus on this significant upcoming milestone

Despite the recent surge, Rivian's share price is still more than 40% lower than its initial 2024 value. This trend is nothing new for the EV manufacturer. Since its 2021 initial public offering (IPO), its shares have lost more than 80% of their value. At that time, the company had a market cap of approximately $100 billion. Today, that figure has shrunk to just $14 billion. On the other hand, established EV maker Tesla has a market cap of nearly $1.3 trillion.

What's intriguing is that Rivian's sales grew dramatically during this period, skyrocketing from nearly nothing to more than $4 billion annually. At its peak, the company reported annual sales of over $5 billion. Despite these impressive numbers, its share price had remained underperforming. The primary reason for this is quite straightforward: The market significantly overvalued Rivian when it went public in 2021. At that time, several EV companies saw an increment in valuations, and clean energy-related businesses saw soaring valuations. Despite Rivian's exceptional vehicle production and consumer love, its business results didn't justify its astronomical valuation. Consequently, a drastic decrease in Rivian's valuation was inevitable.

However, just as markets can overvalue a stock substantially, they can also misvalue it. This might be the case for Rivian now, as its shares are traded at just 3.1 times sales. Mature competitor Tesla, with a more varied business model, trades at nearly 14 times sales. Another EV startup similar to Rivian, Lucid Group, is traded at nearly 10 times sales.

Of course, a low valuation is meaningless to potential investors unless the company can surpass the market's low expectations. One may question Rivian's future prospects based on its recent revenue decline, but consider this: In 2026, the company plans to launch three new mass-market models with starting prices below $50,000. Currently, its two models have base prices of around $70,000 and $76,000, with premium versions costing $100,000 and above. Introducing these new models should allow it to compete for an additional 10 million potential customers with tighter budgets. When Tesla launched its mass-market vehicles - the Model 3 and Model Y - its revenue base grew exponentially in subsequent years. Similar growth could occur for Rivian if it survives till then.

However, if you're still hesitant to purchase shares after the recent surge, keep in mind that there's an event approaching soon that could present an investment opportunity.

This could be your next significant investment opportunity

Rivian will release its quarterly report on Feb. 18. Based on the predictions from its management team, it's expected to generate positive gross margins - a significant win for a company that has been hemorrhaging money on every vehicle sold.

In simple terms, every time Rivian made a sale, its net loss increased. This trend could reverse in the fourth quarter.

If Rivian achieves positive gross margins, the market response would likely be favorable. It would mark a major milestone for a company operating in an industry with numerous financial failures. However, if Rivian fails to meet this target, the stock could drop again, providing an opportunity for investors to buy shares at a discount.

Investing based on quarterly results is generally not a wise strategy. If you admire Rivian as a business - especially while trading at a historically low valuation - don't hesitate to invest at current prices. You may even consider adding more to your position if the company fails to reach gross profitability in this quarter.

Despite the recent surge in Rivian's share price, the company's value is still significantly lower than its initial 2024 value. Investors looking for potential opportunities might want to keep an eye on Rivian's upcoming quarterly report on Feb. 18, as it's predicted to generate positive gross margins, which could trigger a favorable market response.

With Rivian's shares trading at just 3.1 times sales, compared to Tesla's nearly 14 times sales, some investors might perceive this as an undervaluation, especially if the company manages to achieve positive gross margins and surpass market expectations.

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