Two key, recent events finally gave Rivian (NASDAQ:RIVN) stock a significantly larger portion of the respect that it deserves. Analysts are starting to talk positively about the electric vehicle (EV) manufacturer and new partnerships are looking possible.
Moreover, the automaker reiterated last month it believes it can generate positive gross margins in the fourth quarter. There are also multiple signs that demand for its EVs remains strong. Finally, I remain upbeat on its upcoming EV lineup and its ability to generate increased revenue from its commercial business.
Given these points, I continue to recommend that investors buy RIVN stock.
Two Recent, Key Developments
In a note to investors on Jun. 2, well-known Morgan Stanley analyst Adam Jonas wrote Rivian is “uniquely positioned within autos (other than Tesla) on scaling a fully integrated software stack critical to unlocking the AI opportunity.” Jonas wrote the note after meeting with Rivian CEO RJ Scaringe. He pointed out that Rivian relies entirely on its own software and advanced driver assistance systems. The analyst said the firm is well-positioned to partner with veteran automakers that want to reduce the amount of electronic control units that they use.
And speaking of partnerships, last month DigiTimes, a tech news website, indicated Apple (NASDAQ:AAPL) was considering partnering with Rivian. Asked about the possibility during the automaker’s Q1 earnings call, Scaringe did not deny the two companies could form an alliance. Indeed, he responded by noting that his company has a history of launching partnerships.
Given the report and Scaringe’s response, I believe Apple and Rivian will eventually unveil a partnership.
Since the Apple rumor surfaced, RIVN stock has jumped 22% in slightly less than a month. I believe that the rumor — which was given significant credibility by Scaringe’s non-denial — in conjunction with Jonas’ upbeat note makes the Street much more optimistic about the stock.
Positive Gross Margins and Strong Demand Signals
During the conversation with the analyst, Scaringe reiterated Rivian’s long-held assertion it can generate positive gross margins in Q4. The company believes it can accomplish the goal by cutting the amount it pays for supplies, upgrading its factory and selling more regulatory credits to other automakers that are producing fewer EVs.
If the automaker does generate positive gross margins in Q4, the Street should become even more confident on RIVN stock. That confidence would be justified because it would indicate that Rivian is well on its way to becoming profitable.
On the demand front, indications suggest a large and growing number of consumers are eager to buy Rivian’s EVs. First, the number of test drives of its EVs in Q1 surged by 90% last quarter versus Q4. Second, the automaker’s Q1 revenue jumped 82% to $1.2 billion versus the same period a year earlier. Also noteworthy is the fact it delivered 13,588 EVs last quarter. That was quite close to the 13,980 EVs it produced during the period.
Finally, Rivian reported over 68,000 reservations were made for its relatively affordable mid-size R2 SUV less than 24 hours after unveiling it. The company intends to start delivering the R2 in early 2026
Upcoming EVs and the Strong Outlook of Rivian’s Commercial Business
The high number of orders the automaker obtained for the R2 is one reason I’m upbeat on it and the even more affordable R3. Rivian intends to begin delivering the R3 in early 2026. I’m also positive on the EVs’ due to the positive reactions from multiple media outlets and several Wall Street banks.
When it comes to media outlets, Elektrek wrote that “Rivian gets the details right (on the R2 and the R3)” while including many “neat things.” And TechCrunch labeled the R3 “cute as hell.”
As for banks, Bank of America contends the R2 could allow Rivian to “break more into the mass market segment, which represents about half of total U.S. auto sales.” Similarly, Piper Sandler believes the R3 “could be one of the most compelling designs on the market when it is released.”
Finally, as I’ve pointed out in past columns, I’m upbeat about the automaker’s ability to generate more revenue from companies because “AT&T (NYSE:T) has agreed to test Rivian’s delivery vans, while auto reseller JB Poindexter & Co…is selling a new delivery van that utilizes RIVN’s chassis.” Among Poindexter’s customers are package delivery giants Fedex (NYSE:FDX) and UPS (NYSE:UPS).
On the date of publication, Larry Ramer held a long position in RIVN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
