Rivian Automotive (RIVN Quick QuoteRIVN - Free Report) charged up the stock market on Friday, delivering its biggest single-day percentage gain since going public. The stock surged an impressive 24.45% to close at $16.49 after the California-based electric vehicle (EV) maker posted stellar fourth-quarter delivery numbers. Rivian sold 14,183 vehicles in the December quarter, surpassing Wall Street’s estimate of 13,000 units and edging out its delivery figure of 13,972 units in the fourth quarter of 2023.

For the full year, Rivian produced 49,476 vehicles, exceeding its guidance of 47,000–49,000 units. Deliveries also hit 51,579 units, aligning with the company’s forecast of 50,500–52,000 units and surpassing the 50,122 units delivered in 2023. After a challenging 2023, marked by over 40% stock decline, Rivian’s strong start to 2025 has prompted investors to ponder if they should lock in gains now or stay invested.

Image Source: Zacks Investment Research

Key Growth Drivers for RIVN

Overcoming Supply Chain Woes: The EV maker struggled with production and supply chain disruptions last year, which took a toll on its revenues and profitability. However, Rivian has successfully resolved its component shortage issues, paving the way for smooth and consistent production of its R1 and RCV platforms.

Collaboration with VWAGY: A key catalyst for Rivian comes from its strategic partnership with German auto giant Volkswagen (VWAGY Quick QuoteVWAGY - Free Report) . VWAGY has pledged up to $5.8 billion in investment in Rivian. This collaboration aims to enhance Rivian’s technological capabilities and accelerate production timelines.

Expanding Product Portfolio to Broaden Market Reach: Rivian’s product portfolio is set to expand significantly with the introduction of the R2, R3 and R3X models. Scheduled for a 2026 release, R2—a midsize SUV priced at $45,000—offers a more affordable option compared to Rivian’s premium R1 lineup. By targeting budget-conscious buyers, R2 is expected to attract a broader customer base and increase Rivian’s market share. If executed effectively, these models could be pivotal in positioning Rivian as a mainstream EV player rather than a niche luxury brand.

Focus on Cost Efficiency: Rivian is also taking decisive steps to reduce costs. The company aims to achieve gross profitability by the fourth quarter of 2024, a milestone that could enhance investor confidence. Material costs for the R1 lineup are projected to decline by 20% in 2025, while costs for the R2 models could see a 45% reduction.

Georgia Manufacturing Facility: Rivian has secured a $6.6 billion loan from the U.S. Department of Energy to fund the construction of a new manufacturing facility in Georgia. While this development will eventually boost production capacity, the first phase of construction is not expected to be completed until 2028, making it a longer-term growth driver.

Estimates for RIVN

Image Source: Zacks Investment Research

Challenges Tempering Optimism for RIVN

Like most EV startups, Rivian continues to grapple with significant cash burn. Its cash and cash equivalents fell to $5.4 billion at the end of the third quarter of 2024 from $7.9 billion at the end of 2023. Ongoing production scaling and expansion efforts will likely strain its financials further, delaying profitability. As it is, Rivian has lowered its adjusted EBITDA forecast for 2024, projecting losses of $2.83 to $2.88 billion, compared to its prior estimate of $2.7 billion.

Political uncertainties also add to the risks. With Donald Trump’s election victory and his unfriendly stance on e-mobility, concerns over potential shifts in EV policies have grown.

Further, the EV market is becoming increasingly crowded, with established automakers and new entrants vying for market share. Rivian’s ability to differentiate its offerings and sustain growth in this competitive landscape is critical for its success.

Rivian’s Valuation is Stretched

RIVN is currently trading at a forward sales multiple of 3.21, higher than its peer group as well as its own average of 3 over the last five years. The stock carries a Value Score of F.

Image Source: Zacks Investment Research

Rivian: Buy, Sell or Hold?

While the company’s long-term prospects remain compelling, near-term risks cannot be ignored. Whether to book profits or hold depends on your investment horizon and risk tolerance. Short-term traders might find the current surge ripe for profit-taking and buying again on dips, while long-term investors could stay invested, banking on Rivian’s strategic initiatives and growth potential. For new investors, the current price may not be the best entry point. Given the stock’s recent rally and looming uncertainties, waiting for a pullback could offer a better risk-reward profile.

As Rivian gears up to announce its fourth-quarter 2024 financial results on Feb. 20, all eyes will be on its profitability roadmap and guidance for 2025.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.